The Internal Revenue Service herein referred to as the IRS and popularly referred to as Uncle Sam claims that it is, sometimes, unable to carry out its full mandate. It blames that on various damaging myths that shape attitudes in taxpayers about how it operates. Indeed, the tax-collecting agency and its partners find it very difficult to change taxpayers’ perspectives on some issues. Those misunderstandings about its policies and operations mislead people to commit tax fraud frequently. In law, ignorance is never a substantial defense, and it would help if you could understand a few things about the IRS that most people do not. The following are three major myths about the IRS.
1. Corporations Pay Most of American Tax Money
Most conspiracy myths perpetuate the fallacy that corporations are so powerful that they are the puppet masters controlling American politicians and institutions. Well, that could be true or not. However, it is certainly false to think that such perceived economic dominance and financial might of the corporations contribute robustly to America’s tax revenue. That is right; Uncle Sam is still a servant of the American majority. In fact, corporations contribute to less than 12 percent of the total tax revenue collected by the Internal Revenue Service. Even in the warring times of the Second World War when industries had to be taxed extra harder than during the times of peace, the average American citizens still paid way more taxes than the corporations. If at all corrupt corporations bribe politicians and high ranking government officials, they still cannot beat the American bureaucratic systems. They are subject to public auditing, which the IRS conducts randomly, just as they are open to public scrutiny by shareholders and the general public. Additionally, the IRS keeps trying to push for policy changes and amendments so that it can claim more revenue from corporations. The service reasons that by effectively doing so, it can reduce the pressure of tax contribution that falls on the average American citizens.
2. You Can Avoid Tax Audits.
The IRS is fully empowered by law to conduct financial and lifestyle audits on Americans to verify their tax compliance. All citizens, politicians, government officials, corporations and IRS agents are subject to auditing. However, the IRS simply does not have comprehensive faculties to conduct such audits on such a large scale. That would need a very robust and skilled workforce. It would also call for very sophisticated big data analysis and analytics devices and software. However, Uncle Sam has efficient tricks up his sleeves that make American taxpayers remain truthful, cooperative and compliant: the random one percent audit.
Each and every year, the IRS audits about one percent of the tax returns filed by the general public. While people may get away with tax noncompliance for years and years without getting noticed, they face increasing risks of discovery every passing year. When the audits finally get to you, all your tax fraud and noncompliance will come out in the open. You could be tried and convicted for tax noncompliance. Therefore, it is better to always follow the rules so that America continues to grow while you remain on the good books of Uncle Sam.
However, there are some few things that could increase your probability of landing in that one percent. If your tax return filing features any mistakes or inconsistencies, the analysts will definitely suspect falsification. While clean activities do not prevent you from undergoing tax audits, suspicious entries drastically increase the probability of your auditing.
3. The IRS Intentionally Delays All Tax Refunds.
Uncle Sam and all of his financial and legal analysts work very hard to issue tax refunds promptly so that the beneficiaries can get on their business. In fact, 90 percent of all eligible tax refunds are always paid within 21 days. Most of those refunds take durations which are much shorter than the three weeks. However, it is not a guarantee that your refund will necessarily take a short duration for processing. Some refunds are only issued during certain calendar periods. The IRS is guided by rules, regulations and American law. For example, the Additional Child Tax Credit and Earned Income Tax Credit are tax benefits that attract tax refunds. However, the law allows the IRS to issue the refunds only during mid-February.
The IRS also cites other reasons why tax refunds may be delayed. Most of them regard security and privacy issues such as identity theft.