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Tax Audits

Tax audits have a tendency to scare people. Just the thought of being audited can be enough to make you start worrying. But are tax audits really as bad as people think they are? The truth is, they're not that bad.

To begin with, tax audits are very rare; only 1% of all taxpayers get audited. On top of that, only 20% of those who are audited will actually have to personally face a member of the IRS. That's a 1 in 2000 chance of actually coming face-to-face with an auditor.

If you are one of the unlucky 1% of Americans who do get audited, you'll most likely be resolving it through the mail. While most people panic and take action immediately after they get their IRS letter, don't just assume the IRS is correct. If you research the problem, you may find that the IRS is simply unable to match their information against your reported information.

It may even be as easy as providing extra information or just an explanation about it. This usually amounts to a check for unpaid taxes or evidence for a specific claim you've made on your tax report.

And if you're one of the approximately 70,000 unlucky people who get audited at their work or who need to visit an IRS office for an audit, just relax. The IRS will let you know what documents you need before the examinations begin. It's very simple. If your documents match theirs, no problem, you're off the hook.

If there's a discrepancy, you can agree with their documents and just pay the taxes you owe, or you can disagree with their findings and appeal the decision at a later time. And one last tip: when you are using your documents as evidence, it's always best to only offer them the information they need. Anything else could generate additional problems.

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