How Common Are IRS Audits?
The frequency of IRS audits is relatively low compared to the total number of tax returns filed annually. For the most recent tax year, the IRS audited approximately 0.4% of all individual tax returns. This represents a decrease from previous years, highlighting the agency's resource constraints and changing priorities. Despite the low percentage, certain factors can increase the likelihood of being audited.
High-income earners are more susceptible to audits, with the audit rate for those earning over $1 million rising significantly to about 10%. Additionally, discrepancies in reported income, unusually high deductions, or claiming non-traditional tax credits can trigger red flags for the IRS.
Moreover, taxpayers who file their returns with various forms of income, such as business income or rental properties, may also experience a higher audit rate. The IRS employs sophisticated algorithms to identify patterns and anomalies that could signify tax evasion or errors.
In summary, while IRS audits remain infrequent for the average taxpayer, certain financial profiles and filing behaviors can elevate the chances of scrutiny. It is advisable to maintain accurate records and be compliant with tax regulations to minimize the risk of an audit.