Get Free E-Book Today

What are your Chances of an IRS Audit?

During tax season, one of the biggest worries taxpayers have is being audited. The idea of having your return singled out for extra scrutiny strikes fear into many. As an accounting firm, our job is not to help our clients avoid an audit, but rather to ensure that the return will stand up to IRS scrutiny in the event that it is singled out. IRS Audit

Though we make it a priority to prepare for every eventuality, it is still worth noting that the percentage of Americans that are audited each year is actually very small. For example, according to IRS data from the 2012 tax year, if you are a joint filer earning less than $200,000 with no Schedule C or E, you have only a .4% chance of being audited.

If you earn up to $100,000 and file a schedule C or E, your chances increase to a whopping 1.2%. Your likelihood of an audit increases almost threefold to 3.5% if you are a joint filer with a schedule C or E earning between $100,000 and $200,000. The odds drop slightly to 3.2% for filers earning between $200,000 and $1 million. If you earn over $1 million, your odds increase significantly to 12.1%, regardless of whether or not you file a schedule C or E.

What these numbers tell us is that most Americans, those earning under $1 million, have at least a 97.5% chance of not being audited. These odds can be increased even more in your favor by doing one or more of the following:

• Double-Check your Figures: One very simple way to avoid extra scrutiny is to make sure all your figures are correct. Entering incorrect data on your return will often trigger an audit regardless of your tax bracket, because the IRS has no way of knowing if this is a mistake or if it was intentional.

• Take Realistic Deductions: One of the ways the IRS singles out returns for audit is by comparing deductions to others in the same tax bracket. If you have legitimate deductions, by all means take them. But make sure you have full documentation. For example, if you give 25% of your gross income to charity, this may be seen as unusually high compared to other returns, so be sure to have receipts from every organization you gave money to.

• File your Return Later: There is no way to prove this, but it is theorized that the later you file your tax return, the lower your chances of an audit. This is because the closer it gets to April 15 the busier the IRS is processing returns. Also, many believe that the IRS selects most of their returns to be audited for the year before the filing deadline.

Bottom line: if you are worried about an IRS audit, it is important to understand that your chances of being singled out are very slim. Still, be sure your return is honest and accurate, and if you are unsure about any part of it, have it looked over by a tax professional. Remember, you can always file an extension through October 15 if you need extra time to make sure everything is in order.

Scroll to Top