Don't Fall for These 5 Audit Myths

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. Separating truth from fiction is an important exercise for everyone. 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.

• Myth 5: Going through an audit is a disaster.
False! Getting an audit notice from the IRS is 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.

Please call if you are facing an audit or want to discuss an audit preparation plan.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
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For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

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