Once again, my CPA emailed me with a frantic message. She insists that I am going to get audited by the IRS
She says there is no doubt about it.
She emails this warning to me every year.
It is a tradition.
Some people have yearly family reunions, I get yearly warnings from my tax preparer.
She constantly reprimands me that my business’ mission should be about making a profit. But since I always get a refund, it will rattle the wasp’s nest and trigger an immediate IRS audit.
And since I have been in business since the 1990s, I have never been audited.
The IRS fear porn is thick. And its agents (professional tax preparers) continually spread the hint that the IRS is full of jack-booted thugs ready to jail us for getting yearly IRS refunds.
And it is working:
Studies claim 1 out of every 4 Americans fear an IRS audit.
(I think this percentage is WAY low… it is probably more like 99 out of 100).
In fact, I only know of 3 people who never fear the IRS… they cannot WAIT to get audited by the IRS:
Here is why we do not fear an IRS audit:
The IRS wants us to take their business deductions
The tax code is spread out over thousands of pages. And these pages (mostly) detail how to legally and ethically exploit the IRS’ tax-deduction opportunities. I diligently monitor these opportunities and take full advantage of them.
The odds of being audited by the IRS are super low
According to the IRS, the agency audited nearly 934,000 tax returns during the 2017 fiscal year. This is only 0.6% of the total individual returns. That is the lowest individual audit percentage since 2002. (And the recent government shutdown is sure to lower the number of audits, too).
And as lawmakers continue to compound the complexity of the tax code, IRS audits are becoming less common.
IRS employees are super nice
As Franklin D. Roosevelt said, there is nothing to fear but fear itself. And this is especially true with my dealing with the people at the IRS.
I find the employees at the IRS are super nice. They all seem to love their job. Given their power, I find IRS employees are more than fair.
I never ignore IRS notices
This is for sure… ignore an IRS notice more than twice and the IRS does not play nice. No problem. I reply to any mail they send me and all is good.
And even though record-retention guidelines claim we should keep 3 years or 5 years worth of records, lately I never throw away any records.
Always report all income – every penny
Many people I know tell me underreporting income is a HUGE red flag. So, I make sure to honestly report all income… right down to the penny.
IRS auditors do not care about the money
Auditors get graded on closed cases, not for finding extra revenue.
Mistakes do not trigger audits
Math errors may result in an inquiry, but generally will not lead to a full audit. No problem… fix the math now and ask for forgiveness later.
Honesty pays off BIG
The #1 reason I do not fear an audit is I am super organized, detail oriented and 100% honest.
I keep every receipt (unless it is less than a dollar)…
Speaking of receipts, I capture the image of every business receipt I get. I use Wave as my online accounting software. It is better than every tax software I have ever tested – even better than TurboTax and Quickbooks. And, it is all FREE – Wave makes their money selling premium products such as payroll services.