Getting audited by the IRS is one of the biggest fears for taxpayers. But what is the likelihood that you will be audited? And what are common audit triggers?
Most people don't realize that only 1.1 percent of individual taxpayers receive an audit letter every year. And if you are one of the few people audited, you most likely won't have to come face-to-face with an IRS agent. In fact, 75 percent of audits are conducted entirely by mail. That means that only three in 1000 taxpayers meet or open their doors to an IRS agent.
Here are five audit myths debunked, to help ease your tax filing fears this year:
Myth #1: I got a letter from the IRS which means I must be getting audited.
A request for more paperwork doesn't mean you're being audited -- take deep breaths! The IRS may simply be sending you an Automated Adjustment Notice -- letting you know that your refund or taxes owed has been adjusted, usually because of a miscalculation or omission of income. They could also be reconciling what they have in their system to what you reported. In other words, the IRS just needs more information, and rarely do these letters result in the dreaded audit. In fact, some may even result in a bigger refund!
Myth #2: I am more likely to get audited if I do my taxes myself.
False. In fact, the IRS states that returns e-filed using tax software are 20 times more accurate than paper filed tax returns. In addition, online tax preparation companies often include some audit protection in the cost of the software. For example, TurboTax provides audit checks and tools within the product and has an Audit Support Guarantee available to all customers.
Myth #3: Each year I file my tax return around the deadline because it reduces my chances of being audited.
There's no reason to wait to file! Your chances of getting audited don't change based on when you file. The audit selection process does not even begin until the end of June, more than two months after the April tax deadline.
Myth #4: I am more likely to face an audit if I work from home or have a home office.
This was once the case, back when working from home was less common. With millions of home offices running today, the system is far more accommodating for home office users. The important thing to remember: Make sure you keep your receipts and documents and only deduct legitimate business expenses... which means that the expense must be typical and necessary for your business.
Myth #5: I made an error on my tax return, but I'm afraid to amend it because I may be audited.
Amending your return does not equal an audit! In fact, correcting your return promptly stops the running of any interest and penalties that may apply to the originally filed return. So don't be afraid -- go ahead and amend now if you need to correct a mistake on your return.
Have other audit questions? Leave them here or check out the TurboTax blog for more tips and information.