Many people know full well that the process of filing taxes can often be time-consuming and confusing, especially if they didn't do a lot of preparatory work beforehand. Couple that with the perception that even the simplest mistake will trigger the scariest thing in the tax system - an audit - and consumers might be on edge throughout their filing season.
The fact of the matter, though, is that audits are rare. In addition, they can be triggered by any number of things, and usually they have to be pretty serious for the Internal Revenue Service to sit up and take notice of a person's filings. In reality, simple mistakes - such as a failure to carry the one when adding things up, or filling in the wrong type of filing status - isn't going to trigger anything approaching an audit; the IRS will usually contact the person and ask them to re-submit their documents with the correct data, but that's about it. Only about 1 percent of all taxpayers every year (which, to be fair, still amounts to millions of people and businesses nationwide) are hit with an audit.
What causes it, and what does it mean?
As for what leads to an audit itself, there are many things that could take place. If people make a lot of money in a given year, they are far more likely to be audited than those whose incomes are more minimal, and this is also true if they make sizable donations to charity. Other filing items, especially those for losses to offset other aspects of their liabilities, could likewise lead the IRS to want to take a closer look at a taxpayer's documentation, especially if they itemized their deductions.
When an audit takes place, the IRS may go carefully through all their financial data, meaning that they'll have to keep records of everything they claimed on their tax filing. Even having something slightly off in this regard - missing receipts, and so forth - could have a massive negative impact, and potentially result in fines and other problems.
There are many ways in which consumers may be able to significantly reduce their risk of going through an audit, but one of the wisest is to work with a tax consultant regularly throughout the year. This could serve as a strong reminder of what they're supposed to do to not draw the ire of the IRS, while also helping to prevent their likelihood of making a mistake overall.