Tip Category: The Audit
Don't Fall for These Five Audit Myths - A Weekly Tax Tip!
When it comes to the perception of IRS audits, conjecture reigns supreme. The combination of the complex tax code and a government agency with the full authority to enforce it leads to some pretty wild ideas. Here are five audit myths that, if believed, can cost you during an audit:
Myth #1: Audits only happen shortly after tax returns are filed
False! Audits for the most recent tax year start to ramp up a couple months after the filing deadline, but that doesn’t mean the IRS solely focuses its attention on your current tax return. It often goes back up to three years to look at your tax returns (indefinitely if fraud is suspected). Because of this, tax returns should be kept forever and supporting documents should be saved for a minimum of three years for federal purposes.
Myth #2: If audited, all necessary records can be reconstructed
False! If you don’t have a good filing system for your tax records, trying to track down tax receipts from up to three years ago is challenging and may be impossible to obtain. Without proper documentation to prove a deduction or credit, you are left to negotiate with the IRS to determine a reasonable estimate. If you don’t have a good record keeping system, start now to avoid problems during an audit.
Myth #3: The IRS can only audit certain items
False! Audits typically start with a focus on a few items, but can quickly grow depending on what the IRS finds. Providing the proper documentation and answering their questions accurately and succinctly are important to keep the scope of the audit as small as possible.
Myth #4: Only rich people get audited
False! While the odds of being audited are higher for taxpayers on the lower and higher end of the income spectrum, no one is exempt from an audit. Solid audit preparation practices are important for everyone regardless of how much money they make. And with all the media noise about focusing on wealthy taxpayers, this one can become a real problem.
Myth #5: Going through an audit is a disaster
False! Getting an audit notice from the IRS is certainly unnerving, but it doesn’t have to raise your stress levels. Having an expert in your corner to deal with the IRS will help give you peace of mind. Together, we can review the audit request and make a plan to ensure the best possible result for you.
Contact us and let our skilled OAHU Tax Experts offer their well-rounded tax advice and tailored tax solutions to help you file accurate tax reports. Diamond Head Tax Group is Honolulu's trusted source of tax filing services serving Waianae, Honolulu, Kapolei, Oahu and surrounding areas.
Weekly Tax Tip from Diamond Head Tax Group
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