6 Things the IRS Doesn't Want You to Know About Them
"The rich and the poor are alike; they both worry about taxes." — Anon
There is perhaps no entity disliked more than the Internal Revenue Service (IRS). It feels the brunt of our disdain during the late winter and early spring each year and — for some unfortunate souls — far beyond into the future. The IRS has become the punchline to many jokes in the years since its inception. (See also: 15 Surprising Facts About Taxes)
However, there are secrets that the IRS doesn't want everyone to know. These secrets may make your life a little easier and alleviate some of that anxiety that occurs every year around April 15.
1. People Who Earn Less Than $200K Probably Won't Get Audited
This is great for the average taxpayer. Most of us do not make more than $200,000 a year even with two-income households. Reports show that those making over that amount have a 3% chance of being audited while those making more than $1 million have a 6% chance. Those same reports show that those of us making less than $200,000 have a less than 1% chance. So relax as you hit send on your return each year. You are probably going to be just fine.
2. The IRS Fails to Collect Billions of Taxes Owed Every Year
In recent years, the amount of uncollected tax dollars reached $350 billion! Whether you believe that this unclaimed money should be use for programs or to simply pay down our existing national debt, this is money that Americans are not paying as they should be. (This number is estimated to be low, however, as it depends on people to self-report to estimate what they owe.)
3. The IRS Is Not Really Interested in Seizing Property
If you have gotten behind in paying taxes and are dealing with a collection agent, you may find him or her threatening to seize your property and assets. However, this isn't really their goal, just a threat they like to make to get you into action.
Bank accounts are easy to seize and the IRS will do it. However, taking your property and reselling it does not bring in much of a return for the hours and money spent. Your wages can also be garnished relatively easy, and that will be done if you ignore the requests to pay back money owed long enough.
4. Not Every IRS Agent Has a Background in Finance and Taxes
In fact, entry level workers who man the call centers, perform tax audits, and attempt to collect money usually have very little grasp on the tax law. They are trained to perform their jobs in a specific way and may not have the background knowledge required.
In addition, it has been found that those you speak to at the IRS can, in fact, give you the wrong answer almost half the time. For questions about tax law, it is always best to seek the counsel of a trusted CPA or tax attorney.
5. Filing Electronically Saves You a Lot of Hassle
Many issues that arise are due to filing your returns with paper and the USPS. Checks get lost in the mail and delay refunds as well as returns. Numbers get transposed on the forms or addition fails to add up. Social security numbers get entered wrong. All of these things can cause a flag to pop up for a possible audit, delay a refund getting to you, or cause your return to be delayed.
Filing electronically saves you the hassle during the filing process, gets your refund to you quicker, and can give you a peace of mind after you've filed knowing your chances of that audit are reduced.
6. The IRS (or at Least Their Machines) Make Mistakes
Just because the IRS says you owe money, it isn't necessarily so. In fact, the best move you can make when getting an audit notice (especially one that can easily be proven wrong) is to move forward with getting it amended. I actually received a CP-2000 audit notice, claiming I failed to report over $50,000 in income, and it came attached with an $18,000 tax bill, plus fees. It turns out that they mistakenly counted a $600.00 1099-form from a client as a $60,000 1099-form. With the help of a few form letters found on my tax preparer's website and prompt communication, the audit was closed in my favor.
Paying income taxes isn't the highlight of anyone's financial life, but for now, it's here to stay. By being informed and remembering that, even the IRS isn't perfect, you can possibly avoid having to pay more than you really owe.
Do you know any IRS secrets you can reveal? Please share in comments!