Kevin McCormally's Tax Tips-Audit Odds
Monday, March 17, 2008SUSIE GHARIB: Well, it's that time of year again, time to get out those tax forms, the calculator and everything else you need to file your return. In an effort to help, every Monday between now and April 15, we'll bring you our annual tax tips series. Tonight, our tax guru Kevin McCormally, executive editor at "Kiplinger's Personal Finance" says there's no need to fear the taxman.
KEVIN MCCORMALLY. EDITORIAL DIR., KIPLINGER'S PERSONAL FINANCE: Tonight, let me paraphrase an old Irish toast: may the road rise to meet you, the wind be always at your back. And may your tax returns be safe from audit all the days of your life. You certainly don't need the luck of the Irish to avoid an audit. And that's true despite what you've been seeing on TV and reading in the papers. Springtime is always prime time for stories about IRS enforcement activities.
An awful lot of ink was spilled over the Wesley Snipes trial for example. He was acquitted on tax fraud charges but nailed for failing to file a return. And it's not happenstance that the IRS chose this time of year to open its Al Capone vault to the public, to remind us all that the tax agency brought down a gangster the FBI couldn't.
But the fact of the matter is that very few tax returns are ever audited. The latest stats show that one average, the IRS audits just one of every 97 returns. And, most of those are handled by mail, not man-to- man. Even on returns reporting between $100,000 and $1 million in income, only one in 60 goes through the wringer. The IRS loves to flash its tough- guy image this time of year to keep us all on our best behavior. I'm not telling you this to encourage you to play the audit lottery. I want you to be honest. After all, every taxpayer who cheats, means honest men and women have to pay more. But I don't want you to be afraid of the IRS. If you have a legitimate tax break coming, a home office deduction or a big charitable contribution or a casualty loss or whatever, take it. Skipping it, in hopes of avoiding a possible audit, would be like paying extortion and that would be silly as well as costly. I'm Kevin McCormally.
