IRS Tax Audit Myths & Misconceptions

If you’ve never been through an IRS tax audit, you probably have some common misconceptions about what actually triggers an audit. Ask ten people what they think would cause an IRS audit and you would probably get ten different answers. Therefore, we thought we would take a few minutes to clear up a few common myths and misconceptions about what does and does not trigger an IRS audit.

Myth #1 – If you e-file, it will increase the likelihood that you’ll be audited.

The process in which the IRS determines which returns should be audited has nothing to do with the way you chose to file your return. E-filing could actually reduce the chances that your return will be audited due to the fact that electronically filed returns are usually more accurate; therefore, if you e-file, your tax return is less likely to trigger an IRS audit.

Myth #2 – You don’t have to pay taxes on your Social Security benefits.

Many people believe that their Social Security benefits are not taxable. However, that’s not always the case. There are certain income levels that, if exceeded, will require the taxes to be paid. If the bulk of your retirement income is from your Social Security benefits, you won’t have to pay taxes. However, if you receive income from other sources as well, up to 85% of your social security benefits could be taxed.

Myth #3 – If you file an extension, you could trigger an IRS audit.

Some people believe that if they file for an extension, they will draw attention to themselves. Extensions were designed to give taxpayers, who file an extension, an additional six months to complete their returns. There’s no definitive proof that filing an extension triggers an IRS audit. Additionally, it’s possible that filing an extension could actually lessen the likelihood of an audit because you won’t be as rushed to complete your taxes and therefore fewer errors are likely to be made.

Myth #4 – If you file an extension, you will have more time to pay your taxes.

Unfortunately, this is not true. Everyone must pay their taxes by April 15; otherwise, you will have to pay interest and penalties. You can pay your taxes by estimating what you anticipate owing then you need to go ahead and submit your estimated tax payment for that amount. This payment should be included with your file extension request and it should be submitted on or before April 15.

Conclusion

Due to the ever-increasing tax laws and the fact that they’re so difficult to understand, it’s no wonder there’s so much confusion. And that’s exactly how myths and misconceptions get started. When it comes to your taxes, it’s imperative that you understand what’s required of you. The best thing to do if you don’t understand what your rights and responsibilities are is to contact a professional tax consultant and pay for a private consultation or you can call the IRS directly. But whatever you do, don’t assume you know what’s right and what’s wrong. You need to be sure.