Almost every single person I have every talked to is afraid of an audit by the government. This extreme fear paralyzes them and completely prevents them from seeking out new ways to save money.
Your single greatest expense in life is taxes. The government is nice enough to each year create and modify the tax laws to create new opportunities to save money. Sometimes they remove old tax saving benefits, but you will find that often times the old ones that were removed are removed because they are being replaced with new clearer rules.
An unfortunate fact about government benefits is that a very small percentage of people actually take advantage of them. This past year the numbers of people who took advantage of the latest government credits was so low in Canada that the government actually took out advertisements to inform people of the credits they were entitled to.
Thinking about how hard the government is working to try to get people to use the new credits, why is it that we are so afraid of the government. The tax department cannot jail you without trial. They cannot steal away all your money without reason either. Using tax credits as they were designed in the system is not a reason for the government to audit you. Not using tax credits that you are entitled to could be a reason to audit you though, since you are either very foolish or you have something to hide.
I know many business owners who have been through tax audits. While these can be difficult, the government rarely wins in these cases. The tax department actually only wins in less than 25% of the cases taken to court. Before an audit case goes to court you are given many opportunities to reprocess your paperwork and make corrections if required. Quite simply you cannot be forced to pay fines when you didn’t do anything wrong. People who file their taxes correctly and take care not to forget things shouldn’t have a fear of being audited.
Taxes can be very doom and gloom. Take heart though because our legal system enabled us to be innocent until proven guilty. Those people I know who were audited came out alive and most actually came out in a better position financially. Remember that if the government has the right to look back and find errors against you, you also have the right to look back and make positive corrections.