No one likes getting a letter in the mail that says they are being tax audit by the IRS.
But here’s the thing: you shouldn’t let this fear stop you from taking action to improve your finances.
In fact, you should be more willing to invest more of your hard-earned money into your future if it means lesser audit risk.
Tax audit typically only happen to the less than 1 percent of the population that get audited every year. In fact, most people will go through their entire life without ever being audited by the IRS.
With that said, you should not worry about getting audited. Here are five reasons why it would be smart to stop worrying about an audit.
1. You probably won’t get audited.
As we said earlier, most people will never be audited by the IRS.
The IRS has much bigger fish to fry. So the chances of them focusing on you are slim. However, the chances of you getting audited increase the more money you earn.
They typically only audit people who have been making a pretty large income or have been making off-the-wall transactions with their money. The same goes for inheritors of big estates or business owners who have had a lot of cash flow. As you move up the income ladder, your chances of being audited increase.
2. If you have nothing to hide, then you have nothing to fear.
If the IRS is auditing you and it comes out that you have been lying, then you will probably have to pay more than the original tax you owe. The reason is the IRS will throw the book at you to make you pay for the money you still owe.
There are some things you should be worried about if you are audited, but they aren’t related to the IRS.
And besides, it is far better to pay more now than to be audited and pay more later.
3. If you are being audited, it isn’t because you are a bad person.
It is because you probably made a mistake on your taxes. And if you did, then you will be thankful that they caught it while you can still fix it. Like we said earlier, the IRS auditors are looking to find people who are cheating on their taxes. So if you have been audited, it isn’t because you are a bad person — it is because you were just being human.
You won’t be sent to jail, and you won’t have a for-sale sign put up in front of your house.
4. You can reduce your chance for a tax audit.
If you want to reduce your chance for an audit, there are a few things you can do. First, make sure you are keeping The best way to reduce your chances of being audited is to keep your receipts and documentation as organized as possible. The more organized you are, the easier it will be for you to prove that you are right. Most of the time, all it takes to correct a simple mistake is to provide the IRS with the right documentation.
5. IRS only considers two to three years of audits.
This means that you can keep your receipts for about three years. Once you reach the three-year mark, you don’t need to keep your receipts anymore. Thus, you can recycle that folder you are keeping them in.
If you think about it, the three-year rule is a good thing. Why? Because this means that you can save money on filing fees without worrying about what will happen in three years.
Conclusion
So as you can see, you shouldn’t be worried about being audited. When it comes to audits, all you can ever do is to prepare for them. When you are prepared, it will be hard for the IRS to find fault. And when you stop worrying, you will find that the process is quite easy and not stressful.
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