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Tax Audit - You May Have Inadvertently Asked For One

Updated on December 17, 2011

The term "IRS Audit" is a word that no one wants to here. In fact, most people will prepare their taxes in an overly conservative manner in order to ever be audited. While every tax payer should take every legal deduction afforded to them, many do not simply out of fear of being audited.

Sandy Botkin who is an authority in taxes being both a CPA and Tax Attorney states that this is a strategy of the IRS to force compliance. Over paying your taxes is not a smart thing, but I think we can all understand why a person would do this. The horror stories that we have all heard are terrible.

But what if I told you that you may have initiated an audit. A quite little audit that you didn't even know about. Would you do this knowingly? If you were told that the decision you were about to make was going to cause the IRS to look at your tax return more closely do you think it would affect your decisions?

I am sure that most people would at least pay attention too what they were doing if they knew they were inviting the IRS to look at their tax return. Yet thousands of people every month do this.

Right now in the United States many procedures are being put into place to "catch" people not paying all their taxes. State governments are targeting internet sales in order to get "their" sales tax. In fact, I recently heard of a woman who was buying cigarettes over the internet but not paying State sales tax. The State, through their various ways, caught wind of it and sent her a bill for several thousands of dollars. The first thing you should be aware of is that government agencies are now communicating more then ever.

For example, there are many people operating small businesses to generate some extra cash, but do not have a city license. They file their taxes and show their income and expenses, but don't want to pay the extra fees that their city wants to charge them. Cities are now getting a list of people who file schedule C's in their zip code and the city is cross checking it with their business licenses. If you are one of these expect a letter in the mail from your city.

What is this decision that is the topic of this HUB? It's actually a very common decision that many of us have made many times. When you or I get a mortgage or refinance an existing mortgage we will typically sign a form stating that your income can be verified. What you may not know is that the mortgage lender sends your submitted tax return for obtaining a mortgage to the IRS to be compared to your filed tax return. During your loan process you have invited the IRS to look at your income and tax returns so that they can see if you paid taxes on all of your income. Nice isn't it?

First of all let me say that everyone SHOULD file their tax return honestly. Personally, I disagree with the majority of how the USA taxes, but this is my country and I believe that we should all abide by the laws of the land. Secondly, you should not lie when you obtain a loan. I believe that this is in your best interest. Qualifying for a loan that you don't qualify for is only setting yourself up for disaster. But having said that you should also be aware that when you do get a mortgage or refinance your existing mortgage you are inviting a peek at your financials.

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    • HomeEnergy profile image

      HomeEnergy 

      7 years ago from California

      The western world tax system (the US tax system included) is what I may call a "reverse fish net". The big fishes escape the net, the small fishes are caught.

      Impossible though to implement such a thing in a real-life fish net...

    • Deborah-Diane profile image

      Deborah-Diane 

      7 years ago from Orange County, California

      Very thoughtful information that could help many people avoid a tax audit!

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