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What Are The Chances Of Being Audited?

An audit happens when the IRS flags your tax return and reviews it for accuracy. In all, you have about a 0.6% chance of being audited. Things like high income and unusual deductions can increase your risk of getting flagged.

No one wants to be audited. It’s a hassle, and it can be expensive. But I’m betting you never really think about your chances of being audited. 

Most of us think that audits are reserved for the ultra-wealthy, not folks under 30 just trying to get their financial life together. Well, that’s not entirely true. 

The odds of being audited are around 0.6%. So, fairly low. Still, that doesn’t mean you should let your guard down.

What is an audit?


A tax audit is a review of your tax return by the Internal Revenue Service (IRS). During this process, the IRS looks at your return and all your financial information line-by-line to make sure everything is correct.

If they find any errors, they may ask you to pay back taxes or penalties. In extreme cases, you could face criminal charges.

MU30 tip: you’ll always be notified via mail if you’ve been audited. The IRS will never call you by telephone. If you get any suspicious calls, it could be a scam

What are your chances of being audited?

Hearing the words “IRS tax audit” may conjure up nightmares of agents beating down your door, but that’s rarely the case. 

I spoke with Michael Eckstein, an Enrolled Agent (EA) at Eckstein Tax Services, about the chances of being audited and he told me this:

“The chances of a random, full-blown audit are relatively minimal. Most audits are triggered by missing info (like a forgotten W2), incomplete forms, your numbers being totally out of whack, or sometimes, good ol’ random luck of the draw. The best way to prevent these triggered audits is by making sure you don’t cut any corners. Report everything.”

Overall, audits are decreasing

According to recent reports, the odds of being audited are down across the board. In 2020, only 1 in every 166 returns were audited — a significant decrease from previous years.

There are several reasons why audits are down. One of the main reasons is the current economy. With so many people out of work, the IRS budget has shrunk and there’s less money to devote to audits. 

Additionally, the agency has been struggling with a shortage of working power — they simply don’t have enough auditors to review all the tax returns. So, they’ve resorted to auditing those who are most likely to owe larger sums of money to the government. 

This leads me to my next point…

How your income affects your chances of getting audited

Typically, the more you earn, the more likely you are to face an audit.

But there’s an interesting twist: you’re also more likely to get audited if you make less than $25,000 a year and qualify for the earned income tax credit. The reasoning is that the IRS wants to make sure no one is claiming it illegally. 

This table highlights the most recent audit rates, as pulled from the IRS Data Book.  

Total income IRS audit rate
$0 8.9%
$1 to $25,000 0.7%
$25,001 to $50,000 0.4%
$50,001 to $75,000 0.4%
$75,001 to $100,000 0.4%
$100,001 to $200,000 0.4%
$200,001 to $500,000 0.6%
$500,001 to $1,000,000 1.1%
$1,000,001 to $5,000,000 2.5%
$5,000,001 to $10,000,000 5.1%
$10,000,001+ 8.6%

5 red flags that lead to an audit


There are all sorts of red flags that could lead to an audit — claiming day-trading losses on your Schedule C, taking an early payout from a 401(k) or IRA, and failing to report a foreign bank account. 

However, the five biggest red flags that could lead to an audit are: 

1. Not reporting all your income

The IRS has copies of every W2 and 1099 you receive. If you file your tax return and the totals don’t match what they already have in the system, it’s a major red flag. 

So, heed the warning and report every single penny of income you receive — whether it’s from a full-time job, a side-gig, Uber, dog walking, an Etsy shop, TikTok, freelancing, or anything in between.

Read more: Taxes For Freelancers: 7 Steps To Getting It Right

2. Having a high income

Your audit risk increases substantially if you have a high income. For example, those making at least $1 million a year have a 2.5% chance of being audited vs. someone who earns $200,000 a year and has a 0.4% chance. 

This isn’t to say you shouldn’t aim to make a ton of money. Heck, I hope we all become millionaires. But just know that the more you make, the better records you may need to keep to prove it.

3. Taking extremely large deductions, credits, or losses

The IRS knows, on average, how big someone’s deductions, credits, or losses typically are based on their income. If you fall outside the range they’ve labeled as “normal” for any of these things, your return could get flagged for auditing.

That said, don’t be afraid to claim something if you have complete records to back it up. 

Read more: How Long Should You Keep Your Tax Returns?

4. Claiming the American Opportunity Tax credit

The American Opportunity Tax credit is a huge deal if you’re a college student. You can get up to $2,500 for each of your first four years of college!

Because of this, the IRS may want to take a second look at your tax return if they think you’re claiming it when you’re technically not eligible. 

Read more: Need A Tax Break? Here’s A List

5. You’ve traded cryptocurrency

As cryptocurrency gains in popularity, so does the IRS’ scrutiny of it. As such, they’re cracking down on audits for anyone actively selling, receiving, or trading virtual currencies, including bitcoin.

So, make sure you properly disclose everything on your tax return if you have crypto.

Read more: Crypto Crackdown: Why The IRS Isn’t Messing Around This Year

How to reduce your chances of getting audited

There are several things you can do to reduce your chances of being audited. 

Double-check your tax return

First, make sure all the information on your tax return is correct. If there are any errors, it could trigger an IRS audit, or at the very least, lead to a delay in you getting your refund.

Only claim deductions you’re eligible for

Additionally, be careful about claiming deductions or credits you aren’t eligible for. The IRS is cracking down on tax fraud, and they are more likely to audit taxpayers who claim deductions that seem unusually high or out of character — like claiming 100% business use of your vehicle or writing off a charitable donation that represents a large chunk of your income. 

You can learn more about popular deductions in our piece: 10 Deductions You Didn’t Know You Could Take As A Business Owner.

Be honest, always

Finally, just be honest. It’s okay if your income is unusually high, you’ve traded cryptocurrency, or you’re claiming significant deductions or losses on your return. If it’s all correct, you deserve to report everything you can. Provide complete information and be prepared to show proof should the IRS come knockin’. 

What to do if you’re audited by the IRS


At the end of the day, you can do everything right and still get audited. If that happens, take a deep breath and don’t panic. 

  • Gather all the documentation you need to state your case. Receipts, W2s, 1099s, proof of investments, etc., etc. Anything in your financial life that pertains to taxes, you’ll need at your disposal. 
  • Respond to all of the IRS’ requests as soon as you can. Seriously, don’t ignore them, it won’t end well. 
  • Get legal advice from a tax professional — especially if you disagree with the audit results.


Bottom line? The odds of being audited may be down, but that doesn’t mean you can take chances with your taxes. Be sure to file them correctly and on time, and be prepared to answer any questions from the IRS. 

And if you’re worried about making a mistake on your taxes, using a tax prep software or a professional tax preparer can be a great way to get some peace of mind.

About the author


David Weliver

Founder of Money Under 30, David has over 20 years of experience as a personal finance journalist covering credit cards, banking and investing.

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