Did You Know… Your Odds Of Getting Audited Increased This Year?
Yes, it's true. The IRS increased the number of audits up to 1.3 million from about 618,000 in 2000. But even so, in 2006, there were only about 1% of the 132.3 million returns filed in 2005 that were audited.
There are three types of 'audits' performed by the IRS:
- Correspondence Audits
- Field or Desk Audit
- Discrepancy Inquiry
Correspondence Audits are most common if you make below $100,000 a year. In general, these are forms sent in the mail asking for submission of documentation to clarify an item on your return. There may be a proposed adjustment to your tax bill made by the IRS, and it can be appealed. Less than .9% of the under $100,000 returns were subject to audit in 2006, and of that 82% were correspondence audits.
Desk or Field Audits are what most fear: A sit-down at the IRS office. Never fun. It pays to have used a CPA or other tax professional to prepare or examine your return, as they will (sometimes for an additional fee) defend the return by representing you.
The last, a Discrepancy Inquiry(not actually an audit), is when the amount of income you report does not match that which is reported for you, like from employeers, or brokerage houses. This will come shortly after the return is filed, and you just sign it and pay the additional tax if you agree with it. If not, there is also an appeal process.
Good luck with your taxes, and be honest. It COULD help you sleep better at night!
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