The fear of getting audited by the Internal Revenue Service weighs on the minds of worried taxpayers as this year's deadline for filing returns ended Tuesday.
Civil and criminal penalties can apply to your taxes, and some IRS tax forms are more important than others.
You get a letter in the mail, a letter emblazoned with the gut-wrenching acronym, IRS. You say to yourself: "But I filed on time! I paid all my taxes!" That may be, but unfortunately, that doesn't mean you won't be audited. Yes, it’s nerve-wracking. But income tax audits, like death and taxes themselves, are a fact of life in the United States. The Internal Revenue Service examined close to 1.4 million individual tax returns in 2007, about 1 percent of all individual tax returns [source: CNN]. Compare this to 1.29 million returns examined in 2006, and you see that the IRS is becoming increasingly serious about getting its money [source: Kristof].
The very mention of a tax audit can conjure dread in the heart of even the most diligent, honest taxpayer. The perception is that, without warning, a knock at the front door of your home or office could bring with it a team of suited, briefcase-carrying, Secret Service-looking types, who quickly commandeer and confiscate you and everything related to the taxes you just filed.
When you file your taxes, how likely is your return to be flagged for audit? Did you account for every W-2 and Form 1099, use correct math, and match all other data? Did you report big losses or deduct other unusual items? There are many ways to try to audit proof your tax return, and always more ways, some of it is luck. And knowing about IRS traps helps. For example, certain tax mistakes allow the IRS to audit you forever. But here is ome good news amid all this scary news, and ironically, it ties into controversies at the IRS. With budget cuts and the resources the IRS must now devote to Obamacare, the IRS has less time and money to audit. Taxpayers are not disappointed.
Budget cuts at the IRS may mean fewer audits this year, but it doesn't mean everyone is getting off scot-free. Here are some key ways to avoid getting snagged by the IRS.
This is the quintessential good-news/bad-news story. The good news: If you’re worried that the tax return you just sent to the IRS will be audited, breathe easy. The head of the IRS says that budget constraints mean that his agency will perform 100,000 or so fewer audits this year than last.