If I Got a Refund, I'm in the Clear
Sorry to burst your bubble, but this is completely false. If you've received a refund, all that means is that the IRS has agreed with your calculations. Getting a refund has absolutely no bearing on whether or not you will get audited later.
In fact, determining who gets audited happens months later. After your refund is paid, the IRS compares it to a model through a computer check. A computer program called the Discriminant Inventory Function System (DIF) assigns a numeric score to each return. If your score is high, then there's a good chance you may be audited [source:IRS].
Your return may also be selected for audit based off information sent to the IRS by third parties. For instance if the income you reported does not match the information on a 1099 or W-2 form, you have a higher chance of being audited [source:IRS].
And let's also remember the IRS has up to three years, and in some cases six years, to audit you.
These are just a few of the most common myths you'll hear about audits during the tax season. Moral of the story: Don't cheat the IRS, and you'll have nothing to worry about if you do happen to get audited.
Author's Note: 10 Myths About IRS Tax Audits
As a freelance writer I've been running my own business for a few years now and am one of those lovely individuals who file a Schedule C. Rather than leaving it up to chance I went ahead and hired a credible accountant to help me with my books and taxes. Quite frankly, I've seen too many friends get audited because they used sketchy tax preparers, and I refuse to be one of them. Since tax law is always changing you may want to consider getting some help from a real professional. It is well worth the price tag.
- Colorado Bar Association. "How To Deal With (And Survive) I.R.S. Income Tax Audits." (Nov. 13, 2014.) http://www.cobar.org/index.cfm/ID/132/subID/469/How-To-Deal-With-(And-Survive)-I.R.S.-Income-Tax-Audits/
- Ellis, B. "How to survive a tax audit by the IRS." CNN. April 24, 2013 (Nov.13, 2014.) http://money.cnn.com/2013/04/24/pf/taxes/irs-audit/
- Internal Revenue Service. "2013 Enforcement and Service Results." 2013. (Nov. 13, 2014) http://www.irs.gov/PUP/newsroom/FY percent202013 percent20Enforcement percent20and percent20Service percent20Results percent20-- percent20WEB.pdf
- Internal Revenue Service. "Eight Tips for Deducting Charitable Contributions." March 22, 2011. (Nov. 13, 2014) http://www.irs.gov/uac/Eight-Tips-for-Deducting-Charitable-Contributions
- Internal Revenue Service. "Ten Tips for Taxpayers Who Owe Money to the IRS." May 16, 2013. (Nov. 19, 2014) http://www.irs.gov/uac/Ten-Tips-for-Taxpayers-Who-Owe-Money-to-the-IRS
- Internal Revenue Service. "Your Rights As a Taxpayer." June 2014. (Nov. 13, 2014) http://www.irs.gov/pub/irs-pdf/p1.pdf
- Nisall, Eric J. Accountant and Owner of Accountlancer. Personal interview. (Nov. 13, 2014) http://www.accountlancer.com
- Nitti, Tony. "What Are Your Odds of Being Audited by the IRS?" Forbes. March 25, 2013 (Nov. 13, 2014) http://www.forbes.com/sites/anthonynitti/2013/03/25/what-are-your-odds-of-being-audited-by-the-irs/
- Pinola, Melanie. "How Do I Find a Good Tax Professional?" Lifehacker. Feb. 2, 2012 (Nov. 13, 2014) http://lifehacker.com/5881487/how-do-i-find-a-good-tax-professional
- U.S. Government Printing Office. "1998 Internal Revenue Service Restructure and Reform Act." July 22, 1998. (Nov. 13, 2014) http://www.gpo.gov/fdsys/pkg/PLAW-105publ206/html/PLAW-105publ206.htm
- Wood, Robert W. "How Long Can the IRS Audit? It All Depends On You." Forbes. April 3, 2014. (Nov. 13, 2014) http://www.forbes.com/sites/robertwood/2014/04/03/how-long-can-irs-audit-it-all-depends-on-you/
- Woodruff, Mandi. "Five common myths about the dreaded tax audit." Yahoo! Finance. Feb. 3, 2014. (Nov. 13, 2014) http://finance.yahoo.com/news/myths-about-tax-audits-irs-181533675.html
Many Americans don't think about their tax bills until the new year. But there are things you need to do before Dec. 31 if you want to pay less later.