Tax audits can sound like a big ordeal that will cripple your finances. However, tax audits are must easier than they used to be, especially if you are just an individual and not a business. If you'd like to know more about tax audits, check out these five facts.
There Aren't Auto-Audit Deductions
In some cases, you may fear taking some deductions because you assume the IRS always audits these auto-audit deductions. However, those don't really exist. For example, if you work from home, you may have the right to deduct some of your working expenses and utilities from your taxes because they are considered business expenses. Some workers, however, fear that if they claim these deductions, the IRS automatically audits. This may have been true at one point, but with so many people working from home, it's silly to fear deductions for which you qualify.
Everyone Is at Risk of an Audit
Because there aren't really deductions that automatically cause an audit, anyone who files taxes is at risk of an audit because mistakes are so easy to make, especially when you aren't trained in tax laws, rules or regulations. Some people believe that if you deal with cash and avoid debit and credit cards, your risk of getting an audit is nonexistent, but that isn't the case. Even with cash, there is usually a trail, and if you do get audited, the IRS will notice if you have more money than you've claimed. Even if your taxes are perfect, you may come up for a random audit.
An Audit Is Usually Fast and Easy
If you've never experienced an audit before, you may think it's a big ordeal of organizing all your tax documents for the past years and meeting with an IRS agent. Luckily, audits aren't usually handled that way anymore because everything is so automated. Except in serious situations, an audit is usually treated like a mistake. You get a letter stating you've made an error on your taxes and owe extra money. If you disagree, you can submit additional information, but if you did make a mistake, expect to pay. The IRS will usually create a payment schedule based on your income.
Audits Can Go Back Years
While an audit is usually handled quickly, the IRS may actually take a few years to decide to perform the audit. In fact, it's unlikely that if you do get a letter from the IRS that it is referring to your most recent tax return. This is because audits can and often do take time to trigger, so you may get audited for taxes you filed a few years ago. Unfortunately, you will also be responsible for the interest, even though you didn't know you owed the money. In some cases, however, you can get the interest and penalties waived.
A Professional Can Help
Even if your taxes are done by a professional, you can still get audited. However, as long as you are honest about your finances and spending, a professional tax specialist is usually your best bet for filing taxes and dealing with an audit because they have the experience, knowledge and training. Make sure you shop around for a well-respected tax specialist who has been around for a while, and don't fall for inflated promises. During tax season, you may see a lot of new businesses claiming they can get you a big refund, but it's safest to stick with someone you trust and respect.
It's always safer to have a professional tax preparer file your taxes for you. While you can still get audited, they are the best skilled at ensuring your taxes are filed correctly, so you don't get audited in the first place. For more information regarding tax preparation or audits, contact a tax accounting firm in your area today.