Sammy Nickalls
Updated Apr 15, 2016 @ 11:03 am
deduct taxes

OK, real talk: Is there anything more confusing than doing your taxes? It’s something we’ve all gotta deal with, but the forms, the numbers, the terms — it can feel pretty overwhelming. Tax Day is on April 18th, and it’s coming faster than we’d like. . . which is exactly why HelloGiggles compiled our thorniest tax questions and reached out to experts to find out what’s what. With our eight-part tax series, you’ll be *totally* prepared for Tax Day! First, we tackled the basics of doing your taxes; then, we went over what we needed to know about deductions, dependents, refunds, receipts, how to file, and everything else. Now, for the final installment of Talkin’ Taxes, we’re talking about the scary stuff. . . being audited. *gulp*

What are the odds that I will get audited?

Even the word “audited” sounds pretty terrifying, so it’s probably good to know what makes someone likely to get investigated by the IRS. Rest assured, though, that it is extremely unlikely that you will ever be audited.


According to Dr. Monica Hubler, DBA, of Kaplan University’s College of Business and Information Technology, the chances of being audited have shrank considerably for everyone over the years. “The chances of being audited by the IRS have greatly reduced over the past years due to not having enough individuals at the IRS,” Hubler said. “However, [there’s] still a chance.”

If you have a higher salary, you’re more likely to be audited, said Andrew Oswalt, CPA and TaxAct tax analyst. “The risk of audit is quite low,” he explained. “In fact, based on 2014 statistics, less than 1 percent of all individual returns filed were examined by the IRS, whether in person or by mail. The chance of an audit increases when your adjusted gross income is over $100,000.”

That said, he added, anyone can be audited. (Once again, we’re reminded how scary the word “audited” really is.) So what can we do to prevent it? “It is considered best practice to keep good, detailed financial records,” Oswalt told us. “In fact, a good rule of thumb is to keep all tax-related documents for three years from the date a returned is filed.”

Stephanie Gruenhagen, Tax Attorney at Davidoff Hutcher & Citron LLP, added that you should be as truthful as humanly possible on your tax return, including reporting all income. “Other people may have to file forms for deductions for paying [your] income, and if you don’t report that income, you will get a notice from the IRS,” she explained.

She also added that, while deductions can be tempting, you shouldn’t try to deduct excessively if you want to avoid getting audited. “If you make $50,000 [a] year, and [you] take $35,000 in deductions, you can bet a red flag will go up,” she told HelloGiggles.
Credit: Giphy

Other red flags include having a foreign bank account, as well as dramatically increased income in a short amount of time. “[If] you made $75,000 last year and $1.1 million this year, expect a letter from the IRS and letters each quarter afterwards asking for your quarterly tax payment,” Gruenhagen said.

But what happens if I do get audited?

OK, so let’s envision the worst case scenario: You get that frightening letter from the IRS informing you that you’re getting audited. After you’re done freaking out, what do you do?

Richard Gartland, senior tax professional at H&R Block, advised that you probably shouldn’t freak out for too long, because audits require *immediate* action. “Taxpayers who get an audit notice in the mail should respond immediately, because delays could result in additional penalties and fees,” Gartland said. “The IRS conducts most audits by mail and resolving the issue may be as simple as sending back supporting documents.” (Hence, this is why you should be saving all financial documents for at least three years.)

However, if your audit isn’t resolved as simply as that, you may want to consider hiring some help. “If a face-to-face meeting with the IRS becomes necessary, some taxpayers may choose to have their tax professional represent them,” Gartland added. “Taxpayers who disagree with the auditor’s findings can appeal the results.”

All of this may sound frightening, but Gruenhagen insisted that as long as you’ve been truthful and have all the receipts you need, being audited by the IRS is not the end of the world. “If you keep very good records and have documentation to back up your tax return, then don’t worry about it,” she told HelloGiggles. “It might be annoying and you may have to pay someone to help you but in the end, if all of your deductions are legitimate and all of your income is properly recorded, you should come out fine.”

Credit: Giphy