IRS Audit Statistics: A Comprehensive Overview

The Internal Revenue Service (IRS) is responsible for enforcing the federal tax code. One of the primary tools the IRS uses to ensure compliance is through audits. Audits involve examining tax returns to verify the accuracy of the information provided and to ensure that the correct amount of tax has been paid.

Frequency of IRS Audits

The IRS audits a relatively small percentage of individual income tax returns each year. In fiscal year 2022, the IRS closed approximately 626,000 audits of individual income tax returns, representing less than 1% of all returns filed.

Types of Audits

The IRS conducts two primary types of audits:

• Correspondence audits: These audits are conducted through the mail and typically involve requesting additional information or documentation from the taxpayer. Correspondence audits are the most common type of audit, accounting for approximately 85% of all audits conducted in FY2022.

• Field audits: These audits are conducted in person at the taxpayer’s home or business. Field audits are typically more comprehensive than correspondence audits and may involve a thorough review of the taxpayer’s financial records.

Factors Influencing Audit Selection

The IRS uses a variety of factors to select returns for audit, including:

• Income level: High-income taxpayers are more likely to be audited than low-income taxpayers.
• Tax deductions and credits: Taxpayers who claim certain deductions or credits, such as the Earned Income Tax Credit (EITC), are more likely to be audited.
• Prior audit history: Taxpayers who have been audited in the past are more likely to be audited again.
• Random selection: The IRS also randomly selects a small number of returns for audit each year.

Audit Rates by Income Level

The audit rate varies significantly depending on the taxpayer’s income level. According to the IRS, the audit rate for taxpayers with positive income in 2019 was as follows:

• Less than $25,000: 0.26%
• $25,000 – $50,000: 0.43%
• $50,000 – $100,000: 0.74%
• $100,000 – $200,000: 1.06%
• $200,000 – $500,000: 1.63%
• $500,000 – $1 million: 2.46%
• $1 million – $5 million: 4.17%
• $5 million – $10 million: 9.21%
• $10 million or more: 12.45%

Audit Rates for EITC Claimants

Taxpayers who claim the EITC are more likely to be audited than other taxpayers with similar incomes. In 2019, the audit rate for EITC claimants was 0.78%, compared to 0.29% for all other taxpayers with positive income.

Audit Rates by Race

Studies have shown that Black taxpayers are more likely to be audited than taxpayers of other races, even though the IRS does not use race as a factor in its audit selection process. According to a 2023 study by Elzayn et al., Black filers are audited 2.9 to 4.7 times more often than other filers.

Recent IRS Actions

In September 2023, IRS Commissioner Danny Werfel announced that the IRS would be auditing a smaller share of taxpayers who claim the EITC and other refundable tax credits. The IRS is also implementing changes to its audit selection system to reduce disparities in audit rates between taxpayers of different races.

The IRS audits a small percentage of individual income tax returns each year, and the audit rate varies depending on factors such as income level, tax deductions and credits claimed, and prior audit history. The IRS is taking steps to reduce disparities in audit rates between different groups of taxpayers.