A tax audit notice coming from the IRS might be one of the scariest things a person can receive in their lifetime. One thing people should know is that there is very little chance of being audited and there are any ways to ensure that you will not be the subject of a tax audit. It is still recommended to get audit protection insurance to protect yourself and your savings in the event of a tax audit.
Based on the 2016 data book of the IRS, there are 148 million people who filed for tax returns and 1.2 million were audited. This means that not even 1 per cent or 0.8 per cent to be exact were audited from all the tax returns. The odds are getting even smaller because of the budget cuts that the IRS has been experiencing in the past few years. To avoid being audited, here are a few things you should keep in mind.
It is important to file a tax return regardless of you did not receive an income for that specific tax year or if you owe the government no taxes. This can be a red flag for the IRS and they might ask you why you did not file a tax return. For individuals with not taxes due or no income, the tax return should contain an explanation regarding this matter.
Get the best tax preparer in order to avoid yourself being placed in the spotlight of the IRS. You have to keep in mind though that even the best people in their field makes mistake at times. This does not mean that you should not hire a professional because you will need one especially if your financial status is quite complicated. If not, you can use tax preparer tools that are available.
Remember that those who report their income as zero are more likely to be audited than those who have higher income. The IRS gets suspicious that you might be deceiving them thus they will put you under tax audit. Two years ago, 3.25 per cent of people who filed with zero on their adjusted gross income are subjected to an audit. You are lucky if you have audit protection insurance but if you get audited without one then you might have to spend a lot in professional fee and other costs.