An audit by the IRS may seem like a scary, and oftentimes harrowing ride featuring terms and conditions, a man with a briefcase and glasses, and awkward questions that you may not know the answer to. Just take a look at the IRS’s FAQ on the subject for those who are self-employed.
For a majority of taxpayers, if the IRS wants more proof related to your tax filing, they will ask for it. They are not afraid to request more information and corroborate your filing with truth. However, this year there is less reason to worry if you are legitimate and simply worried something may appear wrong but actually isn’t.
Because according to a recent news report, budget cuts and new responsibilities are adding extra strain to the IRS’s ability to dig deeper on returns, even among those trying to defraud the IRS.
Only 0.9 percent of people making less than $200,000 were audited last year.
That’s the the lowest rate of individual audits since 2005, and this year, according to IRS Commissioner John Koskinen, “The numbers will go down.”
Adding that they will only be going after the people who look like the “worst” of all the bad guys, but noting that even with all of the sophisticated technology that reports errors, with extended budget cuts and the fewest number of agents since 1981, there will undoubtedly be some that will slip through the cracks.
This, however, is a double-edged sword for those among us who do the right thing and report our wages as earned and our deductions and dependants accurately.
Because, if you are an individual who made $35,000 last year, but you report that you made $45,000 (whether accidentally or on purpose) the computer will red flag you and there is little doubt someone will contact you.
But if you are a business owner that only deals with cash transactions, with income related expenses that are not independently reported, your chances of being caught for your crime are the lowest they have been in a long time.
Koskinen says that with more resources and money they could police more returns, but reveals that even though he pitches the idea all time to congress, it never pans out. “I say that and everybody shrugs and goes on about their business,” he said.
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