Every year, millions of tax returns pass through the IRS system, but only a small fraction get pulled for review. Still, the thought of being one of them makes many people stop and think, “What are the chances of getting audited?”
That question matters because an audit isn’t just about income levels. The IRS looks for returns that don’t match its data or seem outside normal patterns. It can happen to anyone, be it an employee, a freelancer, or a small business owner, if the numbers don’t add up the way the system expects.
Knowing what really raises those odds helps you stay prepared and avoid small mistakes that can trigger unnecessary attention from the IRS.
What Are the Chances of Getting Audited by the IRS?
Most people assume audits only happen to the rich, but that’s not exactly true. The IRS looks at patterns, not just income. Whether you’re self-employed, earning a steady paycheck, or running a business, certain things in your return can make the IRS take a closer look. It helps to know where you stand and what actually raises your odds.
Chances of IRS Audit by Income Level
Income plays a big part in how likely you are to get audited, but it’s not as simple as “the more you earn, the higher your chances.” The IRS uses data to spot returns that don’t match normal patterns for a given income range.
Incomes Under $500,000
If you make under $500,000 a year, your odds of being audited by the IRS are quite low, usually less than half a percent. That said, even middle-income earners can be flagged if their return shows big deductions or inconsistent numbers. For instance, claiming unusually high expenses for your income level or missing a 1099 from freelance work can still attract attention.
High-Income Earners (Over $1 Million)
Once your income crosses the million-dollar mark, the chances go up sharply. That’s because high earners often have multiple income sources, complex deductions, or investments that the IRS wants to double-check. Returns showing foreign income or large write-offs usually get an extra look.
Chances of IRS Audit by Entity Type
How you earn matters just as much as how much you earn. The IRS keeps a closer eye on taxpayers whose income isn’t automatically reported by an employer, meaning small business owners, freelancers, and those running corporations or partnerships.
Self-Employed and Sole Proprietors
Self-employed individuals face higher audit rates mainly because they report their own income and expenses. If you file a Schedule C, the IRS compares your business category to national averages when expenses or profits look unusual for your line of work, which can raise a red flag.
Corporations, Partnerships, and LLCs
Larger entities get audited less often, but when they do, it’s usually detailed. The IRS checks for payroll consistency, partner distributions, and deductions that seem out of range. S-corps and LLCs are also reviewed when owners take very small salaries but large profit draws, as that can hint at payroll tax issues.
Chances of IRS Audit by Filing Type
Even something as simple as how you file can affect your odds a little. Electronic returns go through automated error checks, while paper returns are handled by humans, and humans spot inconsistencies.
Individual vs. Joint Filers
Married couples filing jointly often have fewer issues because their combined data tends to balance out. On the other hand, single filers with high deductions or unique credits are more likely to stand out in the system.
Electronic vs. Paper Filings
E-filing is faster, cleaner, and less likely to trigger a letter/notice because it reduces manual mistakes. Paper returns can take longer to process and may invite closer scrutiny, especially if any forms or signatures are missing.
Chances of IRS Audit by Risk Behavior
Sometimes, it’s not your income or business type that matters; it’s how your numbers look on paper. Certain patterns make a return appear risky even if the filer did nothing wrong.
Unreported or Inconsistent Income
If the income reported on your tax return doesn’t match the information the IRS receives from employers, clients, or banks, the system flags it instantly. This is one of the fastest ways a return ends up in the audit queue.
Large or Unusual Deductions
Claiming very high deductions compared to your income or listing expenses that seem out of place (like oversized business losses or inflated charitable donations) often leads to follow-up questions.
Factors That Increase Your Chances of an IRS Audit
Most taxpayers never get audited. But when the IRS does take a closer look, it’s usually because something on the return doesn’t fit the usual pattern. The system doesn’t target at random; it looks for numbers that stand out, income that doesn’t match, or deductions that seem a bit too generous. Once you understand what these patterns are, you can file with more confidence and fewer surprises later.
Unreported or Mismatched Income
This is one of the biggest reasons people end up on the IRS radar. Every W-2, 1099, or brokerage form you receive is also sent straight to the IRS. When your return shows a smaller number than what’s in their system, the mismatch is flagged automatically.
Sometimes it’s an honest mistake; maybe a freelance 1099 got lost in the mail, or you forgot about a small savings account that earned a few dollars in interest. But to the IRS, a mismatch is a mismatch. That’s why it helps to double-check that every income source you had for the year is actually on your return.
Deductions That Don’t Add Up
Claiming deductions is completely fine; that’s what they’re there for. But when deductions look too large compared to your income, the IRS system takes notice.
For example, if someone earning $60,000 claims $25,000 in charitable donations or home office expenses, the system will flag that as out of the ordinary. The IRS compares your return to data from similar taxpayers, so it’s not personal; it’s statistical. Keeping receipts and simple explanations ready can make a huge difference if questions ever come up.
Self-Employed or Cash-Based Income
If you run your own business or work in a cash-heavy field like restaurants, salons, construction, or small retail, your audit odds are naturally higher. That’s because no employer is reporting your income to the IRS for verification.
When income and expenses are self-reported, the IRS looks for consistency. Keeping clean records, invoices, and bank statements helps protect you if you ever have to explain the numbers.
Reporting Losses Year After Year
There’s nothing wrong with having a bad year in business. However, when losses appear several years in a row, the IRS starts wondering whether it’s really a business or just a hobby. The general rule is that a business should show profit in at least three out of five years. If not, the IRS may dig deeper to check if the expenses are truly business-related.
If your business is still new or seasonal, good documentation helps show that you’re genuinely operating for profit.
Large Charitable Contributions
Giving to charity is a good thing, but big donation claims always attract a closer look, especially when they seem out of proportion to income. The IRS doesn’t doubt generosity; it just wants to see proof.
If you donate, keep acknowledgment letters from charities or bank records showing payments. For non-cash donations like clothing or furniture, having a list and estimated fair value keeps everything clean if the IRS ever asks.
Refundable Credits and Family-Based Claims
Some credits, like the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC), are perfectly legitimate but often misused. Because of that, the IRS reviews them more carefully.
If you qualify, you should claim them without hesitation; just make sure the information matches up. The IRS checks income, dependents, and residency details closely for these credits.
Foreign Income or Accounts Abroad
Taxpayers with foreign income, investments, or accounts face higher scrutiny simply because reporting requirements are stricter. Under FATCA and FBAR laws, foreign banks share account data with the IRS. If that information doesn’t match what’s reported on your return, it can trigger a review.
Reporting it correctly on Form 8938 or FinCEN Form 114 usually prevents any issue. The problem arises only when accounts or balances are missed.
Amended or Frequently Changed Returns
Filing an amended return is completely acceptable when you catch an error or receive new information. But making large or frequent changes, especially ones that reduce your tax due or increase your refund, can attract extra attention. The IRS may simply want to confirm why the numbers changed.
If you ever file an amendment, just keep the reason clear and supported with documents; that’s usually all they need.
How Does the IRS Flag Returns for Audit?
When a tax return gets flagged, it doesn’t always mean someone at the IRS manually picked it out. In fact, most audits start with a computer, not a person. The IRS uses automated systems to scan millions of returns each year, looking for numbers that don’t make sense together. Once a return stands out, it’s sent for a closer look, sometimes by another computer program and sometimes by an actual examiner.
The Role of the DIF Score
Every tax return the IRS receives gets a number called a Discriminant Inventory Function (DIF) score. Think of it as the IRS’s way of measuring how “unusual” a return looks.
The system compares your income, deductions, and credits with thousands of similar taxpayers in the same income group.
If your deductions, losses, or write-offs seem higher than what’s typical for people like you, your DIF score goes up. A high score doesn’t automatically mean you’ll be audited, but it puts your return in a smaller pool that gets reviewed more closely.
Computer Matching and Third-Party Data
Another major system checks whether your return matches what others reported about you. For example, if your employer filed a W-2 for $80,000 and you reported $75,000, the mismatch triggers a notice.
This computer matching process also includes 1099s from banks, investment firms, and clients, plus forms from mortgage lenders, brokerages, and even payment apps like PayPal or Venmo (for business transactions).
The system automatically compares all of this third-party data with your return before it’s ever approved. If something doesn’t line up, it goes for manual review.
The National Research Program (NRP)
To keep its systems accurate, the IRS runs what’s called the National Research Program, essentially a quality check. Every year, a small sample of returns is chosen for a deep, line-by-line audit. These aren’t necessarily suspicious returns; they’re picked randomly to help the IRS understand current taxpayer trends.
The data from these reviews feeds back into the IRS’s models, improving how future returns are flagged and scored.
Referrals and Whistleblower Tips
Not all audits come from computers. Some are triggered by referrals, either from another IRS department or even from outside tips.
For instance, if a revenue officer handling a payroll issue notices irregularities in an owner’s personal taxes, they can refer that case for audit.
The IRS also has a whistleblower program that rewards people who report serious tax fraud. Those tips are rare but can lead to full investigations when they come with credible evidence.
Random Selection
Finally, there’s a small portion of audits that happen through random selection. While it’s less common today, it still happens. If your return is selected randomly, it doesn’t mean you did anything wrong; it’s just part of the IRS’s effort to maintain a balanced review process.
What to Do If You’re Selected for an Audit?
As discussed earlier, not every audit is serious. Many are routine checks where the IRS just wants to verify a few numbers or documents, but yes, in some cases, it can be more detailed and require closer attention. Either way, knowing what steps to take right after you get that letter makes a big difference in how smoothly things go.
Read the Notice Closely
The letter you receive will tell you everything, like what year the IRS is reviewing, which parts of your return they’re questioning, and what they want from you. Take a few minutes to read it carefully before reacting.
It’s normal to feel nervous, but most of the time, the IRS is just asking for clarification. Ignoring the notice or delaying your response is the only thing that makes it harder later.
Understand the Type of Audit
IRS audit handling can be of various types, and here it is important to know which one you are in order to make the right response:
- Through correspondence for minor clarifications, whereby you just send copies of the papers asked for.
- In an IRS office, for slightly more scrutiny, it is common for some sections of your return to require clarification.
- At your residence or place of business, only in very complicated situations related to business income, or after several years involved in the audit.
The majority of audits are categorized as the first type, easy mail requests, and are settled quickly after the documents are sent.
There are a few ways the IRS handles audits, and understanding which one you’re in helps you respond the right way:
- By mail for small clarifications, where you simply send copies of the requested papers.
- At an IRS office, for a bit more review, usually, if multiple parts of your return need explaining.
- At your home or business, only in complex cases involving business income or multiple years.
Most audits fall under the first type, simple mail requests, and are resolved quickly once you send the documents.
Gather Proof and Stay Organized
Once you know what’s being reviewed, start collecting your proof receipts, bank statements, invoices, or any paperwork that supports your numbers. Keep everything clear and labeled, matching each document to the specific line or claim on your return.
If you realize you made a small mistake, it’s okay to acknowledge it and correct it. The IRS prefers honesty and clarity over confusion, and if the audit leads to a balance you can’t pay right away, this is where tax resolution services can come in.
Respond Before the Deadline
The IRS always gives a clear response date, usually within 30 days. Don’t wait until the last minute. Send your documents early or request extra time if you genuinely need it.
Responding on time shows cooperation, and in most cases, that alone helps settle the matter without further complications.
How to Reduce the Chances of an IRS Audit in the Future?
Audits can’t always be avoided, but most are preventable with small, consistent habits. The IRS doesn’t expect perfection; it looks for accuracy and patterns that make sense. If your return is clean, organized, and well-documented, the chances of being audited drop sharply.
Here’s a quick checklist to keep your filings on the safe side:
✅ Report every income source.
Include all W-2s, 1099s, and side earnings. Even small amounts matter because the IRS already receives copies from employers and payers.
✅ Keep your deductions realistic.
Claim only what’s valid and supported by receipts or statements. If your deductions look much higher than others in your income range, the system will likely flag them.
✅ Stay consistent from year to year.
Sudden changes in income, expenses, or credits without explanation can attract extra attention. When something truly changes, attach a note or supporting detail to clarify it.
✅ File electronically.
E-filing reduces math errors, catches missing fields, and processes your return faster, all things that lower the odds of review.
✅ Keep clear records.
Save receipts, mileage logs, invoices, and donation slips for at least three years. Good records not only prevent stress but also make it easy to respond quickly if questions ever arise.
Representing Yourself vs. Hiring a Professional
When you get an audit notice, one of the first questions that comes to mind is whether you should handle it yourself or bring in audit defense help. The answer really depends on how complex your situation is. Some audits are straightforward and easy to manage on your own, while others need someone who understands the IRS system inside out. Here’s how to decide what’s right for you.
Representing Yourself
If the IRS is only asking for a few documents, like proof of income, a donation receipt, or clarification about a deduction, you can usually handle it yourself.
For these smaller audits, you’ll just gather the requested papers, make clear copies, and send them by mail before the deadline. Keeping your communication polite, organized, and to the point often resolves things quickly.
It’s also smart to keep notes on what you’ve sent and when you’ve sent it. The IRS likes clear documentation, and that record helps if there’s any confusion later.
However, if at any point you feel uncertain, maybe the questions seem too detailed, or you’re not sure what evidence counts as valid, that’s a sign you might need backup.
Hiring a Professional
No matter what your odds of being audited are, having the right guidance can make all the difference once the IRS reaches out.
At this stage, having someone experienced by your side matters. Mr. Michael Sullivan, a former IRS agent, has spent years on the other side of the table, reviewing and resolving cases just like these. Today, he works alongside a team of IRS tax specialists, skilled Attorneys, CPAs, MBAs, Enrolled Agents, and Certified Tax Resolution Experts (CTREs), professionals who understand every angle of an IRS audit.
If you’ve received an IRS notice or believe you might be selected for an audit, get in touch today to protect your rights, present your case clearly, and move forward with confidence knowing you have the right team on your side.
Frequently Asked Questions
In most cases, the IRS can look back three years from the date you filed your tax return. That’s the general statute of limitations for most audits.
However, there are a few exceptions:
If the IRS believes you underreported more than 25% of your income, they can go back six years.
If you never filed a return or filed one with clear intent to evade taxes, there’s no time limit for the IRS to audit those years anytime.
Keeping your records for at least six years is a safe habit, especially if your finances are more complex.
Yes, and in fact, not filing taxes can make an audit even more likely. The IRS doesn’t need a return to start looking into your financial activity; they already get copies of your W-2s, 1099s, and other forms from third parties. If your income is showing up, but no return was filed, that creates a red flag. In many cases, they’ll even file a return for you (called a substitute for return), which often leads to higher taxes and penalties. So even if it’s been years, it’s always better to file before they come knocking.
Overall, the chances of an IRS audit are low, usually less than 1% for most taxpayers. But the odds rise as income and complexity increase.
High-income earners and business owners are reviewed more often because their returns involve larger amounts and more deductions. Self-employed taxpayers and those claiming large credits, like the Earned Income Tax Credit, also face slightly higher audit rates.
In short, the IRS focuses on returns that stand out statistically, not average, well-documented ones.
They can, depending on what the audit finds. If the IRS determines that you owe more tax and you don’t pay it or make arrangements, the balance becomes collectible, and at that point, they may issue a Notice of Federal Tax Lien. This gives them a legal claim to your property until the debt is resolved. A lien isn’t automatic after an audit, but it’s something that can happen if you ignore the outcome or delay payment. Taking action early is the best way to avoid it.
Ignoring an IRS notice is the worst step you can take. When there’s no response, the IRS assumes their proposed changes are correct, meaning they can adjust your tax, add penalties, and begin collection actions without your input.
If you miss a deadline, you can still contact the IRS and ask for reconsideration, but it’s always easier to reply before things escalate. A quick, honest response usually prevents bigger problems later.
If you believe the IRS made a mistake in your audit, you still have options. First, if you're still in the middle of the process, working with a professional who can present your case clearly can help steer things in the right direction. But even after the audit ends, you can request an audit reconsideration, especially if you’ve found new records or believe the IRS overlooked something important. The IRS won’t always reopen the case, but if your request is reasonable and backed by proper documentation, they often will.
You have the right to:
Professional representation. You can authorize a CPA, EA, or attorney to speak on your behalf.
Understand what’s being asked; the IRS must explain why they’re contacting you and what they need.
Appeal or disagree if you believe their findings are incorrect; you can request a review or file an appeal.
Knowing your rights helps you stay confident and ensures you’re treated fairly throughout the process.
Generally, no. Once an audit for a specific tax year is complete, the IRS won’t reopen it unless new information or fraud comes to light. However, if similar issues appear on later returns, like recurring deductions or repeated filing patterns, that could draw attention in future years.
