- Days left

Afraid of an IRS Audit? It's Not As Bad As You Think

×

tax audit triggersNo one is claiming that an IRS audit is a cakewalk. But rest assured, a tax audit is probably less likely -- and less gruesome -- than most people fear.

For starters, last year, only about 1% of taxpayers with incomes under $200,000 got audited. (If you're a millionaire, it's a different story -- fully 12% of them were audited, up from 8% in 2010 and 6% in 2009.)

Then there's the timing issue. The IRS isn't allowed to swoop down upon you just any old time. In most cases, the agency has only three years in which to take action -- beginning with the original due date of your return. So for a 2011 tax return that was due on April 15, 2011, the IRS clock runs out on April 15, 2014.

There are some cases in which the clock runs longer: The IRS has six years to take action when they believe that your income was understated by 25% or more. And if they decide that you seem to have filed a fraudulent return... well, then the clock never runs out. There's no time limit.

Good News

Fortunately, it's rather easy to avoid a bad experience. If you don't commit fraud with your return, you don't have to worry about getting nabbed. Plus, it's unlikely that you'll accidentally understate your taxable income significantly if you're filling out your return responsibly. Most of us receive forms from employers and others precisely detailing our income.

That said, even if you are audited, it's often not a big deal. Most audits don't involve going over every bit of your return -- they typically focus on a particular question.

For example, if the IRS sees something unusual on your return, such as charitable donations or other deductions that are significantly higher than your usual sums or higher than others with similar profiles, they might want to question it. Assuming you've been honest on your return, all you have to do is show up (or send your tax pro) with the documentation to support your return, such as receipts. (Very often, you'll just mail the documentation in.)

Finally, be aware that you can reduce your chances of being audited. For example, you can fill out your return very legibly. And be sure to include all your income. Remember those 1099 forms you get in the mail? Well, the IRS gets that same data, and its computers will be expecting your return to match up with it.

For most of taxpayers, there's little need to worry about tax audits. Especially three years after your returns are due.


Increase your money and finance knowledge from home

What is Inflation?

Why do prices go up?

View Course »

Advice for Recent College Grads

Prepare yourself for the "real world".

View Course »

TurboTax Articles

Ways To Increase Your Tax Refund You Never Thought About

Laying the groundwork for a tax refund requires some simple tax planning, a little research and some forethought. Reviewing your tax status, consulting your spouse when filling out your W-4s and taking advantage of several tax credits can help you increase your tax refund. TurboTax also can help decide which credits can get you the biggest refund.

What Extra Tax Deductions Should I Make Sure To Take?

The federal government offers tax deductions and credits to reduce taxable income under certain circumstances. There are several that are often overlooked, including deductions for job hunting, caregiver expenses for dependents and children while you work, a credit to reduce taxes for moderate- to low-income earners and the premium tax credit associated with the Affordable Care Act. TurboTax can help determine if you qualify for these credits and deductions.

8 Things You Think Are Tax Deductible That Aren't

There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.

9 Things You Didn't Know Were Tax Deductions

Few realizations are more painful than realizing that you forgot to include a tax deduction that would have lowered your tax bill or increased your tax refund on your tax return. Here are some tax deductions that you shouldn't overlook.

Add a Comment

*0 / 3000 Character Maximum

51 Comments

Filter by:
rponds

We have been in two business over the last thirty years and have never made as much as anyone working at a fast food place, we have never taken any cash out of the till or cheated anyone. We are old and only stay in business to pay the payment on the land where our business is. That land represents our "retirement fund" and we are tryiing to figure why the IRS wants to audit us when we don't even make a profit. Thanks to Big Business and a more than generous Government (to big banks etc.) our business is struggling more thaqn usual. Lets have a straight tax and fire all of the IRS people, we could save a few hundred a year on the tax preparer also.

May 13 2012 at 4:31 PM Report abuse rate up rate down Reply
chip19

What a crock. A audit is the worst situation you will likely be in. The IRS is nasty and if they were held to the same laws that the rest of us are, they would be in jail.
In my situation, they audited me for 4 years back. They pulled out random questions and after 3 months, decided to not give me any deductions. Not interest, not work expenses, nothing. They sent me a bill for more then I made. They added up any transfers in the bank and taxed me on it as income. Even my transfers to a tax account that was already accounted for.
Then after 3 years of audit, and coming out with a fairly clean bill except for a refund that they gave me in 2005 that they decided I didn't earn, they sent my tax papers to 4 seperate tax offices in 4 cities. Each city wanted the credit for the taxes being paid. In other words, they wanted not 35k but 4 times 35k, and that is were we sit now. I paid it to one office, but obviously, they do not talk to the other offices. We are at the taxpayers advocate office now.
The IRS is out of control, they are the most dishonest gang of SS style renegades that you will ever meet.
This statement that says a audit isn't that bad, never went through one. It is one of the worst experiences of your life. I will vote for anyone who proposes a flat tax. ANYONE!
I think our freedom's in the USA are fleeting away. By the way, we figured it cost the IRS about 3x more to do the audit then what they collected. Its a long long process and we are paying for it as well. Don't they work for the American people.
The IRS officer who audited us would be in jail if she had pulled this in the public sector.

February 24 2012 at 1:27 AM Report abuse rate up rate down Reply
You Sexy Beast!!

Mistakes happen.....it's called life. We were audited for our 2006 return because of my husband's business expenses. While we stressed out big time from the time of our notice until the time of the audit, we knew we had done nothing wrong, all our numbers were correct. What I suggest for any one going thru an audit is to BE PREPARED. Have all your paperwork organized, and be prepared to explain why you took deductions, etc. We were in and out within 20 minutes with no additional taxes owed, because we were able to explain our deductions and show proof. It's that simple! The auditor told us he was actually amazed at the people he had seen come in for audits who simply handed him their shoebox full of receipts, no organization whatsoever. He said we were the only people he had seen who did not we any additional taxes. He had allotted an hour to us, and we actually just sat and BS'd about random stuff for a while...cats, the blazers, whatever. They are not out to get you, they just want to be sure you are claiming things correctly and honestly

February 23 2012 at 1:37 AM Report abuse rate up rate down Reply
joejoegolfn

Took me 3 years to straighten out a tax return that was filed with my social security number. I had to go through Atlanta, ga., Birmingham ALA., and then Philidelphia PA. Instead of getting 2903.00 refund I was told I owed 15,000.00 and the interest and penalties kept piling up. Someone on the west coast filed a return and then I filed my return. It was a pain but I finally got it straighten out. They actually paid me interest on the 2903.00 they owed me for 3 years. My interest was 3 or 4 hundred dollars. Their interest and penalties would have been 7 thousand dollars.

February 22 2012 at 7:35 PM Report abuse rate up rate down Reply
1 reply to joejoegolfn's comment
Henry ptnm

This is called identity theft for somebody using your Social Security number. If you have a computer, you should get Safe Central and Life Lock on it. I have both of these on mine. I get both of them through my internet service.

February 28 2012 at 6:52 AM Report abuse rate up rate down Reply
signedoff51

Never do an audit without an accountant. The IRS will lie to you. Thier mindset is that everyone is hiding something.

February 22 2012 at 2:06 PM Report abuse rate up rate down Reply
highlanders0017

if their computures know how much you got and owe ,why must they play games ? why dont they just bill ya?

February 22 2012 at 10:55 AM Report abuse +1 rate up rate down Reply
1 reply to highlanders0017's comment
Setanta

LOL--we love to get their letters and do EXACTLY as TOLD to do ,as their letter states :date/time/location and to bring this letter with you ...........and that's ALL WE DO and couldn't care anyless about THEM and THEIR BS.

February 22 2012 at 2:55 PM Report abuse rate up rate down Reply
bartonlyle

I've been audited twice. The first time the IRS ended up owing me money, and the second time the auditor was a shrew who was convinced I was hiding something because I declared $1 in income (supported by a 1099), a royalty check received from a book I co-authored. She was rude, and obviously bent on hammering me with fines. I preempted her findings by writing directly to the regional director of the IRS filing a complaint against her BEFORE I received her assessment of $100K in fines. The regional director wiped the slate clean. Remember, those directors are political appointees, and if too many complaints are filed they stand to lose their jobs.

February 22 2012 at 9:22 AM Report abuse +3 rate up rate down Reply
burgesswv

I went through two audits in the past'; i came up short ona med entry, but the tax man forgive me ,as iI couldn't locate two prescriptions ttwo got lost..
An other year I was audited for a mistake the preparer had made. He agreed to give me time payments for recovery. . IRS agents are humans also, please remember !

February 22 2012 at 4:27 AM Report abuse rate up rate down Reply
burgesswv

I went through two audits in the past'; i came up short ona med entry, but the tax man forgive me ,as iI couldn't locate two prescriptions ttwo got lost..
An other year I was audited for a mistake the preparer had made. He agreed to give me time payments for recovery.

February 22 2012 at 4:25 AM Report abuse rate up rate down Reply
aevf101

IRS auditors don't show up on your door step to compliment you on your bookeeping skills. They're looking for money, period.

February 21 2012 at 11:36 PM Report abuse +1 rate up rate down Reply