Saving And Controlling Your Spending

The IRS and Uncle Sam are all words that sent chills down most American’s spine. The government tax system can be confusing to understand and scary for those who mess up. There are taxes and penalties and even jail time for those who mess with the IRS, but what is the real deal with the government tax system and how can you avoid an audit and any trouble with them?

Always Pay On Time

One of the biggest ways to get Uncle Sam knocking at your door is to avoid filing a tax return. See, each employer sends a report with your social security number and wages to the IRS. They match it up at the end of the year. If you don’t file a tax return, their new system will flag you and audit you. The old methods had to be matched up manually; however, their new system will do it with the click of a button. The verdict is they are catching more and more people not filing their returns or not filing the proper amounts. Nothing will bring more trouble to a person than avoiding their tax obligations. The biggest reason why people don’t file is they owe. It is better to file the taxes, even if there is no money to pay them, and then work out a payment arrangement.

Do People Really Go To Jail?

Yes, people really do to go to jail for tax evasion. However, these people have to do something really bad to elevate things to that level. The IRS wants to collect their money first and foremost. They cannot collect money if you are sitting in a slammer. Most people will be audited and required to pay a certain amount within a certain period of time. While that is the vast majority, there are those who will face criminal prosecution if they find that there is blatant cause why someone didn’t pay their taxes. Nothing riles old Uncle Sam up more than someone who is trying to defraud the government. The IRS cannot just lock you up, there has to be formal charges and a trial, as with any other criminal matter.

The Truth about Audits

The dreaded audit will probably happen at least once in someone’s lifetime. The IRS uses the mail examination the most. This is where a discrepancy is found in the return; they correct it and send a letter to the tax payer. You have a change to dispute the changes, show proof and ultimately pay what they say you owe. An examination is an informal audit and shouldn’t cause a great deal of stress. They usually have found something small and can fix it. Also, during these types of reviews, they are typically not going to look at past records, just the issue at hand.

A traditional audit can be done through the mail or in person. This is usually for larger issues where they have found several years of discrepancies. A person who receives this notice will need to comply. This is their first step in finding out how honest the tax payer has been and if there are grounds for tax evasion. While most pass with flying colors, but remember their system has flagged an individual for a reason and they want to get to the bottom of it.