The Internal Revenue Service (IRS) is responsible for enforcing the nation’s tax laws. As part of its enforcement efforts, the IRS conducts audits of individual and business tax returns. An audit is a review of a taxpayer’s return to ensure that the taxpayer has reported all income and claimed all allowable deductions and credits.
The chances of being audited by the IRS are relatively low. In 2022, the IRS audited only 0.2% of all individual tax returns. This means that only one out of every 500 returns was audited.
However, certain factors can increase the chances of being audited. These factors include:
- High income: Taxpayers with high incomes are more likely to be audited than taxpayers with low incomes.
- Complex tax returns: Taxpayers with complex tax returns are more likely to be audited than taxpayers with simple tax returns.
- Certain deductions and credits: Taxpayers who claim certain deductions and credits are more likely to be audited. These deductions and credits include the earned income tax credit, the child tax credit, and the home mortgage interest deduction.
- Errors on tax returns: Taxpayers who make errors on their tax returns are more likely to be audited. These errors can include mathematical errors, errors in reporting income, and errors in claiming deductions and credits.
If you are audited by the IRS, you should not panic. The audit process is designed to be fair and impartial. The IRS auditor will review your tax return and ask you questions about your income, deductions, and credits. You will have the opportunity to provide documentation to support your claims.
If the auditor finds that you have made any errors on your tax return, you may be required to pay additional taxes and penalties. However, if the auditor finds that your return is correct, you will not owe any additional taxes.
How to Reduce Your Chances of Being Audited
There are a number of things you can do to reduce your chances of being audited by the IRS. These things include:
- File an accurate tax return: The best way to reduce your chances of being audited is to file an accurate tax return. This means reporting all of your income and claiming all of the deductions and credits that you are entitled to.
- Keep good records: You should keep good records of all of your income and expenses. This will make it easier to prepare your tax return and respond to any questions from the IRS.
- Be prepared to provide documentation: If you are audited by the IRS, you will be required to provide documentation to support your claims. This documentation can include pay stubs, bank statements, and receipts.
- Hire a tax professional: If you have a complex tax return or if you are not sure how to file your taxes, you should consider hiring a tax professional. A tax professional can help you prepare your return and ensure that it is accurate.
What to Do If You Are Audited
If you are audited by the IRS, you should not panic. The audit process is designed to be fair and impartial. The IRS auditor will review your tax return and ask you questions about your income, deductions, and credits. You will have the opportunity to provide documentation to support your claims.
If the auditor finds that you have made any errors on your tax return, you may be required to pay additional taxes and penalties. However, if the auditor finds that your return is correct, you will not owe any additional taxes.
Here are some tips for dealing with an IRS audit:
- Be cooperative: The IRS auditor is simply trying to do their job. Be cooperative and answer their questions honestly.
- Provide documentation: If the auditor asks for documentation, provide it to them promptly.
- Get help from a tax professional: If you are not sure how to respond to the auditor’s questions, you can get help from a tax professional.
- File an appeal: If you disagree with the auditor’s findings, you can file an appeal.
The chances of being audited by the IRS are relatively low. However, certain factors can increase the chances of being audited. If you are audited by the IRS, you should not panic. The audit process is designed to be fair and impartial. The IRS auditor will review your tax return and ask you questions about your income, deductions, and credits. You will have the opportunity to provide documentation to support your claims.
If you follow the tips in this article, you can reduce your chances of being audited by the IRS.
What Are Your Chances of Being Audited by the IRS?
FAQ
What triggers an audit from the IRS?
How hard is it to get audited by the IRS?
How does the IRS decide who gets audited?
How long after filing taxes do you usually get audited?
What are the chances of being audited by the IRS?
Shockingly low for most people. The number of IRS audits has been declining for years. Today, an American’s overall chances of being audited are about 1 in 200. Moreover, three-quarters of all audits are correspondence audits in which the IRS sends the taxpayer a letter in the mail asking about one or two issues.
What percentage of tax returns are audited by the IRS?
In recent years, the IRS has audited significantly less than 1% of all individual tax returns. Plus, most audits are handled solely by mail, meaning taxpayers selected for an audit typically never actually meet with an IRS agent in person. Also, increased audits won’t happen overnight.
Do you get audited by the IRS?
Although the IRS audits only a small percentage of filed returns, there is a chance the agency will audit your own. The myths about who or who does not get audited—and why—run the gamut. The looming myth out there suggests the audit process is something to be desperately feared.
Are tax audits a common occurrence?
In fact, Zinman says, one of the most enduring tax audit myths holds that an audit is a common occurrence. He says audits are generally “a lose-lose situation” for the IRS because they require a lot of resources and because of the negative image audits project onto the IRS. “Historically, only about 1% of filers get audited.