The overall audit rate is less than 1% — but that number is misleading. Certain income levels, deduction patterns, and filing behaviors dramatically increase your risk. Understanding what the IRS looks for is the first step to protecting yourself.
The IRS's Selection Process
Most audits aren't random. The IRS uses a scoring system called the Discriminant Information Function (DIF) that compares your return to statistical norms for your income level and industry. Returns that deviate significantly from the norm score higher and are more likely to be selected for review.
Top Audit Triggers
High Income
Audit rates increase significantly with income. Returns with $500,000-$1M in income are audited at about 1.1%. Over $1M: about 2.4%. Over $10M: about 8.7%. High income alone isn't a problem — it just means more scrutiny.
Schedule C Losses
Claiming business losses year after year raises questions about whether the activity is a legitimate business or a hobby. The IRS has a "3 of 5 years profitable" safe harbor for most businesses. Document your business intent carefully if you're in early-stage or seasonal businesses.
Large Charitable Deductions
Charitable deductions that are disproportionately large relative to income are a red flag. Non-cash donations over $500 require Form 8283. Donations over $5,000 require a qualified appraisal. Keep all receipts and acknowledgment letters.
Home Office and Vehicle Deductions
These are legitimate deductions that are frequently abused. Claiming 100% business use of a vehicle is almost never credible. Document actual business use with a mileage log. For home office, maintain the exclusive use requirement strictly.
Important
The IRS receives copies of all 1099s, W-2s, and other information returns. If income reported on these forms doesn't match your return, you'll receive a CP2000 notice automatically — no human review required.
The Documentation Standard
The IRS's standard is "contemporaneous documentation" — records created at the time of the transaction, not reconstructed later. For business expenses: receipts, bank statements, and a brief note about the business purpose. For mileage: a log with date, destination, business purpose, and miles. For meals: who you met with and what was discussed.
If You're Selected for Audit
Most audits are correspondence audits — the IRS sends a letter asking for documentation of specific items. Respond within the deadline, provide only what's requested, and be factual. For field audits (an IRS agent visits your home or business), get professional representation before the meeting.
Related Resource
Facing an audit or worried about IRS scrutiny?
Our IRS Tax Resolution FAQ covers audit representation, what to expect during an audit, how we handle IRS communication on your behalf, and your rights as a taxpayer.
The best audit defense is a well-organized set of records. If you can document every deduction you claimed, an audit is an inconvenience, not a catastrophe.
Tiffany Nellums, EA
Tiffany Nellums, EA
Tiffany is an IRS Licensed Enrolled Agent and NAEA member with over 10 years of experience helping business owners, real estate investors, and high-income earners reduce their tax burden through proactive planning and strategic structuring.