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Many myths and horror stories have been spun about the IRS. It is to be expected given that every single American will interact with the agency in some way at some point (or many points) in their life. While the IRS sometimes seems to work in a fog of mystery, we can reliably bust at least four IRS-related myths.
1) Deductions are the way to an auditor’s heart. It’s not surprising that audits play a huge role in IRS mythology with deductions being possibly the number one bogeyman. It seems we hear of many well-meaning taxpayers undone by their over eager use of deductions. The reality is that there are no deductions that will automatically trigger an audit, not even the beloved home office deduction. The key with deductions, as with all matter relating to taxes, is to be truthful. This means not taking deductions that you are not entitled to but also not fearing a possible audit to forego deductions that you are legitimately entitled to.
2) If I owe the IRS money, I will be incarcerated. So this is an interesting one, because we have all heard of people going to jail due to their dealings with the IRS. The reality is that the crime that will get you jailed is fraud—as in filing a knowingly false tax return, withholding assets, and basically doing anything to deliberately cheat the IRS of its due. Simply owing money to the IRS because you made a mistake on your return or your tax preparer made errors that you were not aware of will not send you to jail. The bottom line is that there is no debtor’s prison in the U.S. – you cannot be jailed for owing the IRS money. That being said, the IRS does have many powers to collect against you and make your life very difficult in the meantime. The attorneys at Weisberg Kainen Mark can help you work out a payment plan or collection alternative with the IRS.
3) Audit = Ruin. Audits happen. More often than not, they are routine, not a cause for concern, and above all, should not require copious amounts of fees from a representative. “Should,” here, is a relative term because the final cost of the audit lies not in the hands of the representative, but in those of the client. A prepared client who has taken the time to get all of their documentation together can save themselves thousands of dollars because they have done this work for the representative. Simply handing your representative a box of documents with a cheerful “have at it!” will likely increase the overall cost.
4) But I got a professional tax service to do my return. I shouldn’t be audited! This is the other side of the representation coin. Again, tax returns prepared by representatives are only as good as the information they get from their clients. The onus is on the client to get them what they need and, most importantly, to tell them about assets and income. On the flip side, using a shady representative may also affect whether you get audited. Not all representatives are created equal and the IRS knows this, probably better than you do. Choosing a reputable and honest representative and giving them all of the information and records they need will go a long way to ensuring that you are filing accurate returns. Thus, even if you get audited, the audit should not be particularly painful.
If you have another IRS myth that you would like busted or a looming IRS problem, contact the attorneys at Weisberg Kainen Mark today and let us get started on the process for you.
Weisberg Kainen Mark, PL
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