Top Myths about Taxes

Last updated on February 10, 2023

Unlike other misconceptions, myths about taxes can affect your finances. The tax code is more than four million words long and has grown increasingly complex over the years as additions and amendments have been made to it. Some of the top myths that most taxpayers believe to be true are about tax obligations and audits. USA Today shares the facts behind the myths so that taxpayers do not hold false expectations and efficiently prepare for their tax obligations. When filing this tax season, know these myths:

You can audit-proof your return

“The Treasury Inspector General for Tax Administration, America’s tax czar, estimates that taxpayers will owe $345 billion more than what they claim they owe on their income tax returns for 2013. Unfortunately for the Internal Revenue Service, they won’t be able to reclaim all of that money. All told, only about 1% of all tax returns filed are audited.

“Unfortunately for tax filers, there’s no way to ensure that you won’t fall into that 1%. The IRS can, and does, audit people from every income bracket, including those who report no income. In fact, tax professionals are obligated to prepare returns as if they were going to be audited by the IRS, and they are not permitted to make decisions regarding a filing position based on the likelihood that it will be examined. What this means is that tax professionals are bound by sacred oath to not game the audit lottery. They are (technically) not allowed to advise you on the likelihood that your return will be audited based on how you choose to file.”

Audits are scary

“Believe it or not, the IRS would like to go about its business as unobtrusively as possible. Of the approximately 1.48 million individual income tax returns examined (audited) in fiscal 2012, only 24% were examined in the ‘field,’ as the IRS puts it. The rest were conducted through correspondence.

“‘Enforcement of the tax laws is an integral component of the IRS’s mission,’ wrote the IRS in its 2012 data book. ‘Field examinations are generally performed in person by revenue agents, tax compliance officers, tax examiners, and revenue officer examiners. However, some field examinations may ultimately be conducted through correspondence in order to better serve the taxpayer.’

“Something that is worth noting is that when businesses are audited, they are way more likely to get a visit from a man in dark glasses than not. Of the 32,701 corporation income tax returns examined in fiscal 2012 (1.6% of total corporation tax returns filed), an incredible 97% were examined in the field. Another fun, but perhaps self-explanatory, fact: 100% of estate tax returns that are audited are audited in the field.”

Another myth regarding taxes is that post-retirement, you are not required to pay taxes. Even though seniors receive many benefits after retirement, they are required to pay taxes, including taxes on their retirement funds when they make withdrawals.