Understanding Various Tax Audit Myths

With every person having a bit of fear regarding tax audits, there are many illogical myths that have taken birth. While some of the myths are too crazy to be believed, there are many that have become a myth due to incomplete education regarding tax audits. The ones, who want to stay away from these fables of taxes, need to emphasize on making out what is a myth and what holds relevance.

• The very common myth that most people fall prey to is that if one is having an office at ones home; it will be treated as a red flag by the Internal Revenue System’s audit officers. This factor was a flag in the past but now it is no longer treated as a flag by the IRS, but yes still the home office deductions are monitored keenly. IRS reviews the complete situation to make sure that you are not making wrong claims for the home office deductions.
• The second most common myth is that if you receive a coded mail from IRS, it means that you have got an audit flag. This holds no basic relevance as IRS sends coded mails to ensure a safe and secure mailing process and nothing else.
• One myth that has become a part of each times tax filing scenario is that if one files the tax after the audit season one would not be audited. All the tax payers have to comprehend that both filing late or early is not going to help in any way in staying away from audits.
• One myth which is more prevalent in the higher income group is that once you have made a specific amount of money, there are no chances of audit left. Well, again wrong, IRS has nothing to do with the income when it comes to audit as IRS sends audit letters to taxpayers belonging to all income groups.
• Another myth that is still in the minds of many is that if one has received the refund, the possibilities of being audited are nil. All the tax payers have to remember that IRS has the authority to audit any return upto three years and that too after the refund has been received.
• One more myth that has been created by incapable tax professionals is that if one hires a tax professional, one will not be audited. There is nothing bad in trusting ones tax professional, but if he says that he will keep you away from audits, do not believe it.

Most business owners believe that if they show losses in their return, they would not be audited. Again wrong, filing wrong or non existing business losses just leads to one thing and that is scrupulous attitude of internal revenue system.

One myth which is completely opposite of the basic truth is that the ones who deal with cash do not have to face audits. Dealing with cash and not having complete receipts is one such thing which is more than enough to get a red flag from IRS for auditing.

It is always better to arm oneself with right knowledge regarding audits and staying away from myths, if one wants to be a stress free tax payer.