It depends on the situation, of course. I’m most specifically interested in what an audit would entail were I to be audited. It’s not a completely useless question since (if I understand correctly) you can be audited at random, and not just for red flags.
My wife and I have retirement accounts, we have college savings accounts for our kids, we don’t own a home, we have no investments (other than through the retirement accounts).
I don’t know what else is relevant here, but the basic idea I’m trying to get across is, we have just about the simplest tax situation I can imagine for a married couple with children with enough income for things like retirement accounts.
So–if I were to get audited, what kinds of things would they want me to hand in to them? How hard would it be? Etc.
They wanted documentation on every line of the tax return. All our deductions, all our W-2s, everything.
It wasn’t nearly as bad as I expected, and I did not wind up owing a dime. But we had all our records, and our tax person (Peg, may God bless and keep her pencils sharp) had everything put together and ready. It was just bang, bang, bang - here is iron-clad proof of every single thing we said, and the relevant parts of the tax code to back us up.
About four hours of preparation, and the audit itself was about two hours. Unpleasant and stressful, but not ultimately too horrible.
I’m assuming that we’re talking about the IRS. Here are some things they’d probably want to see:
First, proof that your kids are really yours (birth certificates) and that they live with you (school records or other evidence of residency). In mixed families with split custody, there can be a lot more to prove here than in a traditional nuclear family.
Second, a list of your bank accounts and copies of statements. They’d use this to trace income and see if the deposits are explained by your paychecks. If there are deposits that were gifts or cash, they might want proof of the source for these deposits. (They’d be wanting to see if you had side businesses or other income you weren’t reporting). Normally, this would also be used to back up deductions, but you say you don’t have any.
Third, they’d probably want to see your expenses, living situation, cars, etc. This would be used to see if you are reporting an income consistent with your lifestyle. If you make $30k a year, but you have a private jet, a yacht and a solid gold Ferrari, they’ll want to know how you paid for them.
Keep in mind that most audits are on higher-income taxpayers and business owners. There’s not a lot of wiggle room for a wage-earner without many deductions and they aren’t going to spend time trying to get blood out of a stone.
I’m not talking about crazy tax protester arguments as to why I don’t have to file a return. Let’s say I’ve filed a return, but lied, cheated, and stole throughout the whole form. Now the IRS audits me and wants me to prove that my business, which grossed $11 last year really had over $30k in travel expenses.
I can’t prove that. I made it up. So am I forced to sit down, without an attorney, and have to further lie to the government or otherwise give evidence against myself?
Bolding mine. This is why the 5th most especially does not apply – you’ve already “testified,” and even in a criminal trial you couldn’t take the 5th after that.
And you most certainly don’t have to attend an audit without an attorney, although I suspect there’s very little good one could do in your hypothetical.
I must file a tax return. The courts have ruled that I can’t claim the 5th and refuse to file. It would be the worst form of bootstrapping for the government to say that by filing I have waived my 5th amendment rights and must spill the beans.
It isn’t testimony like in a criminal trial. If I am under investigation and begin talking to police, I can stop talking at any time and assert the 5th.
I don’t really understand your question, especially the bolded part, because you are coming at the situation from a strange angle.
You are always perfectly free to do absolutely nothing.
If you get a letter saying you are being audited, you can throw it in the trash and carry on about your business like you never received it. You can then continue to live in your own private world where you aren’t being audited, aren’t being sued, haven’t been served with papers, and didn’t have a default judgement entered against you. Now, at some point, some people are going to come to your house and take your stuff, but at no point will you be “forced to sit down” etc.