Posted June 2015
In the 1960s, the letter that most males dreaded getting was from the draft board. The letters started with "Greetings" but brought anything BUT good news.
Today, and as was the case back then, the letter most Americans dread receiving is from the IRS. The envelope itself sends a person's blood pressure higher, even if it is just an acknowledgement of an inquiry. But when it indicates an error in the return, or notice of an examination… panic sets in.
But how likely is it that you will be one of the "lucky" ones selected?
For 2014, of ALL returns filed, only .86% were selected for audit. (Less than 1%.) And because of layoffs, etc., that percentage has been decreasing over the past few years from a "high" of 1.03% in 2012.
Who are the likely subjects of an audit? Reporting no income caused 5.26% of the audits in 2014. And not until you have income over $1 million does it exceed that amount. At $500,000 of income, the audit chances are just 1.75%.
So should you worry?
Maintain good records and understand what you can and cannot deduct. And of equal if not greater importance, make sure you include all income.
Unsure of what is allowed? Ask your CPA.