- March 12, 2019
- Posted by: oneplacefinancial
- Category: Tax preparation
A tax audit is a stressful procedure to undergo. It doesn’t help that IRS notices for tax audits can be unclear, since they often don’t mention the reasons why you need one.
There are over 141.2 million taxpayers in the United States who have collectively contributed $1.45 trillion in income taxes. Of these, 1 in 60 people are said to be audited every year. Tax audits are more common than you think, but there are many myths that still surround the subject.
The experts at One Place Financial are here to debunk these myths:
Tax audits are to be feared
Most individuals are deathly afraid of getting a notice from the IRS. In reality, not all IRS notices require a lengthy response or even a response at all. If you’re sent a notice for a tax audit, you only need to respond to a few of their questions.
The majority of the time, IRS agents require documents that can resolve the problem. Once you send in the required information, they check for additional money and penalties, after which the case is closed.
A correspondence audit is more common than a tax audit. A correspondence audit is much easier to deal with. The in-person audit, on the other hand, is when an IRS agent requests an appointment to speak with you.
Most of the time, the issue is simple; it could just be a minor error too, for e.g., an individual sold some stock and forgot to record it.
Those who fall in the lower tax bracket aren’t audited
Income tax is a progressive tax. The more your yearly income, the higher the percentage of tax you need to pay. Tax rates are determined by the income slabs you fall under. Most people believe that because they are in the moderate to low tax slab, they will never be summoned for a tax audit.
The IRS has increased its audits per year. It’s irresponsible to think that you won’t be audited. Experts urge individuals to maintain records so that one can provide information and proof whenever needed.
Audits are done immediately
IRS abides by the statute of a tax audit 3 years after the due date. For substantial errors, the IRS can go back 6 years into your records too.
Tax audits occur most frequently within the 2 year period after filing. The reason behind this is that IRS agents have to work on millions of accounts, which takes time.