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10 Myths About IRS Audits

1

If I Got a Refund, I'm in the Clear

buying a plane
Go ahead: Put a down payment on your private plane with your tax refund. Just remember that getting the check doesn't mean you can never be audited for that return. Kiyoshi Takahase segundo/Hemera/Thinkstock

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You might assume that because the IRS accepted your return and paid a refund, that means you are in the clear. But that's not necessarily the case. While the IRS says that it tries to audit tax returns as soon as possible after they are filed, in practice, the volume of returns that it has to manage means that it can take a while to get around to them. "Most audits will be of returns filed with the last two years," the IRS explains on its website [source: IRS].

Returns sometimes are flagged for audits by a computerized system that looks for numbers that are outside the statistical norms for similar returns. Additionally, the IRS sometimes selects returns for audits because they involve issues or transactions with business partners or investors who've already been picked out for scrutiny [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].

If your return is pulled, an experienced auditor will take a closer look at it. In some cases, that person eventually may opt to accept the return. But if the auditor spots something that looks questionable, he or she will identify the items and forward it to an examining group for a fuller audit [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.

Last editorial update on Feb 27, 2020 05:33:33 pm.

Author's Note: 10 Myths About IRS Tax Audits

Since tax law is always changing, , you may want to consider getting some help from a tax professional. It is well worth the price tag.

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Sources

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  • Congressional Budget Office. "Increase Appropriations for the Internal Revenue Service's Enforcement Initiatives. " Dec. 13, 2018. (Feb. 23, 2020) https://www.cbo.gov/budget-options/2018/54826
  • Ellis, B. "How to survive a tax audit by the IRS." CNN. April 24, 2013 (Feb. 23, 2020.) http://money.cnn.com/2013/04/24/pf/taxes/irs-audit/
  • Internal Revenue Service. "Earned Income Tax Credit Income Limits and Maximum Credit Amounts. " Dec. 30, 2019. (Feb. 23, 2020) https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-tax-credit-income-limits-and-maximum-credit-amounts
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  • Internal Revenue Service. "IRS Audits." Jan 16, 2020. (Feb. 23, 2020)
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