If you’re like many taxpayers, simply hearing the word “audit” may make you nervous. We all fear tax audits because the process could result in our owing even more money to the IRS. Not to mention, the audit process itself is stressful and time-consuming, as you hunt down old receipts and try to prove every business expense.
An estimated 1.6 million people “fudge” on their income taxes each year, so it’s understandable that the IRS would conduct random audits to try and recover some lost tax revenue. For most people, the risk of an audit is small: If you make between $25,000 and $200,000 annually, your risk of an audit is about 1 percent. The IRS tends to focus more on higher earners, particularly those who earn more than $200,000, or those who claim no adjusted gross income but still qualify for certain tax benefits.
Even when the risk is low, we would all love to receive assurance that our tax returns will not be audited. Unfortunately there is no way to guarantee that, but there is one thing we can all do to greatly lessen our odds of an audit: File electronic returns instead of paper returns.
The error rate on paper tax returns is 21 percent, according to the IRS. On the other hand, using tax software cuts your risk of an error down to about 0.5 percent. Errors on paper returns aren’t all due to cheating or even mathematical errors, either. Sometimes the error is simply due to illegible handwriting, or even errors made by IRS agents as they enter your return into the system!
If you don’t feel comfortable with your computer skills, talk to a tax professional about help with your income taxes. Most tax professionals use special software themselves, so you can rest assured your risk of an audit is as low as possible.
14104 – 2015/2/13