When you think of the IRS, do you picture a building full of accountants combing tax records to catch you in a mistake, then cackling as they dispatch a league of bounty hunters to kick down the door and drag you to tax jail?
Or, do you envision a series of drab offices filled with outdated technology from the 1960s, phones ringing off the hook nonstop, and a team so understaffed it cannot answer?
One of these visions of the IRS is more accurate than the other — and it isn’t the tax-collecting fleet of Boba Fetts.
In all likelihood, the IRS is much less frightening than what you have been led to believe. Let’s take a closer look as we try to reduce your financial anxiety by debunking a few lies about the IRS.
The IRS will bust down your door to collect unpaid taxes
Have you always thought of an audit as an action-packed raid complete with handcuffs, a guarded van, and a squadron of bulky law enforcement officers? We almost hate to disappoint you, but the reality is that the IRS rarely makes house calls.
If your taxes are overdue, the worst thing you’re likely to receive is a letter in the mail politely requesting that you make a payment at your earliest convenience. Even in the event of an audit, you’ll probably get a letter requesting additional documentation.
A few people do end up with IRS revenue agents on their doorsteps. If that happens to you, we can guarantee your agent will be much more like Will Ferrell’s frazzled everyman in “Stranger Than Fiction” and much less like Arnold Schwarzenegger’s band of fighters in “Predator.”
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The IRS will call you if taxes are overdue
When you don’t pay taxes on time, the IRS will notify you quietly through snail mail, not via a phone call.
Instead of escalating threats, you’ll simply get an increasingly boring series of letters reminding you to pay your taxes, along with helpful, detailed instructions on how to do so.
However, that doesn’t mean you can ignore these requests simply because they are polite. If you do not pay Uncle Sam, eventually the gloves may come off.
The IRS is getting 87,000 new agents to audit Americans
First things first: The IRS likely isn’t actually getting almost 90,000 new agents. The 87,000 number appears to come from a 2021 Treasury Department estimate of how many employees must be hired to meet staffing needs as people retire from or otherwise leave the IRS.
The actual number of agents who will be hired remains unclear at this point.
Government officials say increased funding for the IRS should mean the agency will have the resources to pursue high-income tax evaders. The White House estimates the richest 1% of earners evade $160 billion in tax payments each year.
With more money, new staff, and better technology, the IRS should have the time to scour the complex tax returns of higher earners.
The IRS is likely to jail you for not paying your taxes
Yes, infamous gangster, Al Capone was caught and imprisoned on charges of tax evasion. But as long as you’re not one of the most notorious gangsters of the Roaring ‘20s, it’s unlikely the IRS will send you to jail for unpaid taxes.
The risk of going to jail increases if you go beyond not paying your taxes and commit tax fraud. In 2017, there were 584 tax fraud convictions, with 59.1% of the offenders being sentenced to jail, according to the U.S. Sentencing Commission.
The IRS never negotiates
If you can’t afford to pay your taxes, you don’t need to go on the run from the law. The IRS has a variety of options to help you pay what you owe — none of which involve sending you to jail just because you don’t have enough money for taxes.
For instance, if you can’t pay your taxes by the tax deadline, you can request an extension of up to 120 days. If that isn’t enough time for you, apply online for an individualized repayment plan that will work with your budget.
If neither of those solutions works for you, the IRS also accepts requests for payment compromises. The government will look at factors like your expenses, income, and ability to repay your debt. Then, the IRS will work with you to negotiate a lower amount you can pay without incurring financial hardship.
Claiming a home office deduction will trigger an audit
If you claim a disproportionate amount of deductions on your taxes, you might raise a few eyebrows at the IRS. But simply listing a deduction — including a home office deduction — won’t automatically trigger a closer look at your taxes.
The IRS doesn’t require taxes on illegal activities
We assume you didn’t make most of your money last year doing something illegal. But on the off-chance that you did, you’re still expected to pay taxes on any income you earned illegally.
Did you steal someone’s property? Unless you return it within the tax year, you owe taxes on the amount stolen. Did you profit from drug sales? Yep, you have to pay taxes on that income too.
Not paying taxes on illegal income is exactly what landed Al Capone in jail.
The IRS is fine with you claiming a pet as a dependent
The tax code doesn’t explicitly state that only humans can be claimed as dependents on a tax return, but that’s presumably because the writers of the code thought it was self-evident.
In case you’re wondering, though: No, you cannot claim a pet as a dependent on your tax return. So, please don’t try.
Yes, taxes are complicated, and filing can be scary. Making a mistake sometimes does have financial consequences.
But the IRS generally is not as frightening as it’s been made out to be. Good luck filing taxes this year, and remember that as long as you’re reporting all your income, you will avoid key money mistakes that can get you in hot water with the feds.
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