It’s tax time in the U.S., which means Americans and residents are hurriedly poring over paperwork, filling in forms and hoping to file by the April 15 deadline.
While for many it may be routine, for others it’s a significant source of stress. A friend recently told me taxes were “driving her crazy” because she was worried about the ramifications of making a mistake.
One way to reduce a stressful situation is to think about the worst case scenarios – and just how unlikely they are to transpire. So to calm her down, I pointed out a few facts about what could happen if you do something wrong on your taxes and then regaled her with the only story I could find of the tax man actually driving someone crazy.
It made her a lot calmer, so if you are stressing about taxes these facts might help you too.
1. Jail time
We may as well start with the absolute worst case scenario if there’s a problem with your taxes: You could go to jail.
This is highly unlikely, however. The most recent year of data is from 2016, when just 927 people received jail sentences for tax crimes. The crimes were things like selling fake tax software, embezzling large sums of money, being an unscrupulous tax return preparer, and challenging the legality of taxes and refusing to file.
The IRS also put another 1,200 people in jail for other severe crimes like identity theft, money laundering or not reporting money earned from drug trafficking. The IRS is very clear in its instructions: “Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1.”
Put simply, no one goes to jail for making an innocent mistake when filing out their tax forms.
2. The dreaded audit
The second-worst thing that could happen is getting audited. This is also a low probability event.
Ordinary people are more likely to die or be seriously injured in a car accident than get dragged into the IRS offices for an audit.
If you want the exact figures, in calendar year 2016 individuals filed 150 million tax returns. The IRS examined just 0.6 percent of them.
Moreover, 77 percent of these tax examinations were done by sending letters back and forth. That means less than 0.2 percent of all filers had to go into the IRS to have their taxes examined.
Your odds of being audited increase if you are very rich or self-employed with lots of revenue, but most people in these categories pay tax lawyers to worry for them.
3. Mathematical mayhem
Lots of people make minor math errors when they file their taxes. But if you do, you shouldn’t sweat it.
The IRS even tracks the number of math mistakes.