Again - so much bad information floating around about IRS Audits. Here is an article with references to the real statistics.
The risk of an IRS audit – the examination of a tax return for accuracy – is generally low for most taxpayers, but it varies widely by income level and type of return. Overall audit rates have fallen to historic lows in recent years due to resource constraints, but certain categories of taxpayers (like very high-income filers and those claiming specific credits) still face higher-than-average audit probabilities
Below, we break down IRS audit rates by income and filing status (including high-net-worth individuals, corporations, partnerships, S-corps, and estate/gift tax returns), distinguish between random and targeted audits, identify common IRS audit triggers, and discuss recent data (from roughly the past 3–5 years) along with expected audit trends for the near future. All data and projections are sourced from recent IRS reports, government analyses, and expert commentary as cited.
Before we get into the weeds on this, if you want to learn more about how we get each of our clients "audit ready" by crossing our t's and dotting our i's, book a call here.
Audit Rates by Income Level (Individuals)
Audit coverage for individual income tax returns is very low on average – on the order of a few tenths of a percent in recent years
However, it varies significantly by income. Generally, audit likelihood increases at the extremes of income (very low-income filers claiming certain credits, and very high-income filers) and is lowest for middle-income ranges:
Overall individual audit rate: About 0.3% to 0.4% in recent years. For example, of ~154 million individual returns filed for 2018 income, only ~520,000 were audited (roughly 0.34%) In FY2021 it was about 4.1 audits per 1,000 returns (0.41%)
This is down sharply from a decade earlier (2011’s rate was ~0.9%) due to budget cuts and reduced staffing.
Low-income filers (under ~$25k): Those claiming the Earned Income Tax Credit (EITC) – typically lower-income wage earners – actually face a higher-than-average audit rate, as the IRS targets this credit for fraud prevention. In FY 2021, taxpayers with <$25k income who claimed EITC were audited at about 13 per 1,000 returns (1.3%), compared to roughly 2.6 per 1,000 for all other taxpayers
In other words, the poorest EITC claimants were audited five times more often than everyone else
By contrast, low-income filers without EITC have a much lower audit risk (generally well under 0.5%). This disparity stems from IRS anti-fraud efforts around the refundable credit. EITC claimants faced about 13 audits per 1,000 returns, roughly five times the rate of other taxpayers.
Middle-income filers: For incomes in, say, the $50k–$100k range, audit rates have been extremely low – on the order of 0.1%–0.2% in recent data
For example, filers with $50–75k income were audited only about 0.1% of the time for tax year 2018.
Even incomes up to $200k have seen audit coverage of around 0.2% or less.
In short, typical wage-earning households have a very slim chance of audit in the current environment.
Upper-middle and high-income filers: Audit odds begin rising for higher incomes, especially those into the millions. For instance, individuals reporting $500k to $1 million of income have recently faced roughly a 0.4–0.6% audit rate
Those with $1–5 million income might see around 1–2% of returns examined. The audit rate grows for ultra-high incomes: taxpayers with >$5 million income had about a 2–3% audit rate for recent tax years (e.g. ~2.0% for $5–10M, and climbing higher as audits of those years are completed). At the very top, individuals earning >$10 million per year have had the greatest audit exposure. The IRS reports that for tax year 2019, about 11.0% of returns with $10+ million total positive income were audited (as of the latest data).
In tax year 2018, the final audit rate for $10M+ filers was around 9.2%, down from 13.6% in 2012– reflecting a decline in high-end enforcement, but still significantly higher than any other income group. In short, high-net-worth individuals (especially those with eight-figure incomes) face audit chances in the high single-digit percent – orders of magnitude above the average filer.
It’s worth noting that these audit rate figures for high incomes tend to increase over time as the IRS continues to select and close audits within the three-year statutory window.
For example, initial Data Book snapshots might show a few percent of $5M+ returns audited, but the final rate after a few years can end up well above that (as seen with $10M+ returns rising from ~2% initial to ~9–11% final). Thus, wealthy taxpayers may eventually have roughly a 1 in 10 chance of audit for a given year’s return.
Audit Rates by Type of Tax Return (Filing Status)
Audit risk also varies by the type of tax return or entity. The IRS reports audit “coverage” statistics for different filing categories: individuals, C-corporations, S-corporations, partnerships, and estate/gift tax returns. Below is a breakdown of recent audit rates for each category:
Individuals (Form 1040)
As described above, individual Form 1040 returns overall have had an audit coverage on the order of 0.2–0.4% in recent years. Most of these exams are done via correspondence (mail) focused on specific issues. Within the individual category, audit rates span a wide range depending on income (from ~0.1% for middle incomes up to ~10%+ for ultra-high incomes) and specific credits claimed (with EITC claimants notably higher at ~0.8–1% on average). Overall, about 90% of all IRS audits are of individual returns, simply because individual taxpayers file the vast majority of returns.
Corporations (C-Corp Business Returns)
Corporation income tax returns (Form 1120) show a bifurcation by size: small corporations are rarely audited, whereas large corporations face higher coverage:
Small C-corps: For corporations with limited assets (e.g. under $10 million), audit rates have been quite low – typically well below 1%. For example, corporations with under $1 million in assets had well under 1% chance of audit in recent years. Overall, the audit rate for all C-corp returns (big and small combined) was about 0.6% in FY 2022 (down from ~1.3% in 2012). A tax industry analysis noted that on average, C-corp returns had around a 0.9% audit rate in a recent year.
Large C-corporations: Audit likelihood rises with corporate asset size. Corporations with >$10 million in assets had an exam rate of about 8% in one recent year. Within that, the very largest corporations (multi-billion-dollar firms) are frequently audited. Historically, corporations with over $20 billion in assets have had extremely high coverage – on the order of 50–60% of such returns examined. (In 2011, >84% of $20B+ asset corporations were audited, falling to ~57% by 2018.) Even those with $5 billion to $20 billion in assets often see double-digit percentage audit rates. Recent IRS data (as of tax year 2020) show, for example, a 17.7% audit rate for corporations >$20B and ~11.5% for those $5B–$20B (though these figures were interim and will rise as audits conclude). In short, large corporate filers are far more likely to be audited than small businesses – virtually all Fortune 500-level companies can expect IRS examinations periodically, whereas a small privately-held corporation has minimal chance in a given year.
(Note: S-corporations are discussed separately below, as they are pass-through entities, not taxed at the corporate level.)
Partnerships and S-Corporations (Pass-Through Entities)
Partnership (Form 1065) and S-corporation (Form 1120-S) returns historically have had very low audit coverage – even lower than individuals. In recent IRS Data Book tables, audit rates for partnerships have been around 0.1% or less, and for S-corps around 0.2% or less. For example, the audit rate for partnerships fell from 0.3% in 2012 to about 0.1% by 2018. In FY 2020, only a few hundred partnership returns were examined out of ~4.6 million filed (virtually 0.0% coverage in that snapshot). S-corps are similarly seldom audited (roughly a few hundred out of ~4.9 million returns in 2020, again ~0.01–0.02%).
These extremely low audit rates for pass-through entities have been a point of concern, as large partnerships can be quite complex. The IRS has acknowledged that limited resources have constrained partnership audits, but this is an area of renewed focus going forward (with plans to increase scrutiny of large partnerships using new funding). Still, for typical small partnerships and S-corps, the probability of audit in recent years has been negligible. (If a partnership or S-corp is audited, often the examination may be tied to specific issues or part of a high-income individual’s audit, rather than broad random selection.)
Estate and Gift Tax Returns
Estate tax (Form 706) and gift tax (Form 709) returns have much higher audit rates relative to most income tax returns, especially for large estates:
Estate Tax: Because only estates above a high net worth threshold must file an estate tax return, the IRS pays close attention to them. Over the past decade, roughly 10% of estate tax returns have been audited. In fact, for estates over $10 million, one analysis noted the audit rate jumps to about 31%. (Another source found about 30% of “taxable estates” – those owing estate tax – get audited.) This makes estate tax returns one of the most likely to be examined of any tax filing category. The key issues are often valuation of assets (the IRS has specialized appraisers to ensure assets aren’t undervalued to reduce estate tax) and proper application of estate tax exclusions/exemptions.
Gift Tax: By contrast, gift tax returns are audited at a much lower rate – historically under 1%. Just under 1% of all gift tax returns have been examined in recent years. Gift tax filings are more numerous (many people file Form 709 for large lifetime gifts even if no tax is due), and only significant gifts that raise valuation questions or tie into estate planning schemes tend to draw IRS scrutiny. Still, certain high-value or complex gifts (for example, gifts of hard-to-value assets, or those involving family partnerships) can trigger audits, especially if they are part of an estate tax avoidance strategy.
In summary, estate tax returns (especially for large estates) carry a relatively high audit risk – on the order of 1 in 10 overall, and as high as 1 in 3 for very wealthy estates – whereas gift tax returns average well below 1% audited. For context, estate and gift returns together make up only a small fraction (roughly 2%) of all IRS audits, but they are a clear focus area when large dollar amounts are at stake.
Random vs. Targeted Audits (How Audits Are Selected)
Not all IRS audits are initiated for the same reason. The IRS uses a combination of random selection and targeted selection criteria to decide which returns to examine:
Random Audits (Compliance Research): A small portion of audits are truly random, conducted as part of the IRS’s National Research Program (NRP). The IRS periodically audits a statistically valid random sample of returns to gather data and update its audit selection models. These NRP audits are essentially for research – they help the IRS develop “norms” of typical return behavior and refine the Discriminant Function scoring (DIF) algorithms that flag anomalies. Random NRP audits can be quite comprehensive (since their goal is to measure compliance). Fortunately for taxpayers, the number of random audits is limited. In one analysis of IRS field audits, about 17% of individual field examinations in 2016 were NRP random audits. Overall, NRP studies might involve on the order of tens of thousands of random audits in a given cycle, which is a small fraction of the total returns filed. Thus, the vast majority of taxpayers will never face a purely random audit. If you are randomly selected, it’s essentially bad luck – your return wasn’t flagged for any issue, but it will be reviewed line-by-line as part of a compliance sample.
Targeted Audits (Risk-Based or Issue-Driven): Most IRS audits are triggered by specific criteria that indicate a higher risk of error or underreporting. The IRS uses computerized screening tools to compare each return against norms and score its potential for discrepancies. The primary system, the Discriminant Inventory Function (DIF), assigns scores to returns based on how much the entries deviate from statistical expectations. Returns with high DIF scores are candidates for audit. In addition, the IRS has filters for certain issues of interest (for instance, an unusually high charitable deduction or an Earned Income Credit claim might be automatically reviewed). Many audits are initiated because of document matching discrepancies – for example, if the income reported on your return doesn’t match Forms W-2/1099 reported to the IRS, the automated underreporter system will flag it, often leading to a correspondence audit or notice. The IRS also selects returns linked to known non-compliance campaigns or specific tax shelters. In short, targeted audits are driven by data and criteria suggesting something on the return could be inaccurate.
Related Audits: Another non-random selection method is when a related examination leads to your return. If, for example, the IRS audits a business partner, investor, or tax preparer and finds issues, they may audit your return as well due to that connection. Similarly, participation in transactions that are under IRS scrutiny (say, you invested in a partnership that is being audited) can pull you into an audit. These are not random – they are triggered by association.
In practice, over 90% of audits are targeted rather than purely random. As evidence, in FY 2021, the IRS managed to conduct ~659,000 audits mainly by “jacking up” correspondence audits on specific line items. Fully 85% of audits are now done by correspondence (mail) focusing on narrow issues, versus about 15% by field exam. Those correspondence audits are usually triggered by things like income mismatch, EITC claims, or other clear flags (they are inexpensive for the IRS to do at scale). Random NRP audits, in contrast, are far fewer but tend to be very in-depth when they occur. In summary, if you are audited, it’s far more likely because something on your return tripped a wire in the IRS’s filters or a broader enforcement initiative, rather than sheer chance.
Common IRS Audit Triggers (Non-Random Selection Criteria)
Tax returns are often selected for audit due to specific “red flags” or triggers that the IRS (either via computer screening or manual review) looks for. While the IRS does not publicly publish its complete audit selection formula, many known and suspected triggers have been identified through IRS documentation, tax court cases, and analysis by tax professionals. Below is a list of common audit triggers and risk factors for non-random IRS audits:
Unreported Income or Mismatched Income: Failing to report all taxable income is one of the most surefire audit triggers. The IRS’s automated matching will catch discrepancies between what you report and what employers, banks, and brokers report on W-2s and 1099s. If you omit a Form 1099 or otherwise “under-report” income, expect at least a notice and potentially an audit examination. Example: A freelancer receiving multiple 1099-NEC forms who leaves one out will likely hear from the IRS. (This also includes reporting incorrect taxable income – e.g., misclassifying income or not reporting gambling winnings, etc. The IRS gets copies of most third-party income forms, so discrepancies are low-hanging fruit for audits.)
Excessive Deductions or Credits Relative to Income: Large deductions or credits that seem disproportionate to your income can draw scrutiny. A classic case is huge charitable contributions on a modest income – if someone earning, say, $30,000 claims $20,000 of charitable donations, the IRS may flag the return. Similarly, very large medical expenses, casualty losses, or other itemized deductions well above the norm for your income bracket can trigger review. The IRS uses algorithms to identify returns that stray far from statistical norms. Example: A taxpayer with moderate income claiming an unusually high mortgage interest or property tax deduction might be asked to substantiate those items.
Schedule C (Small Business) Losses or Expenses That Appear Questionable: Sole proprietors and independent contractors (filing Schedule C) are often seen as higher audit risks because income is self-reported. Specific red flags in this area include recurring losses year after year (which raises the “hobby loss” issue – the IRS may suspect the activity is not a genuine profit-seeking business). The IRS and courts have a history of disallowing losses for activities deemed hobbies rather than businesses. For instance, if you report a Schedule C loss every year from breeding horses or photography while having substantial other income, the IRS may audit to see if you have a profit motive. Additionally, overly high business expenses relative to income can trigger an audit – e.g. claiming extremely high travel, meal, or entertainment expenses for a one-person business. The IRS knows what ratios are typical for certain businesses; expenses that significantly exceed those norms (or income) could be a flag.
Large Meal, Travel, or Vehicle Expenses (Especially if Lifestyle Indications Don’t Match): Deductions for business meals, travel, and vehicle use are often scrutinized. The rules for these deductions are strict, and IRS examiners know they’re sometimes abused. If you deduct lavish meals or extensive “business” travel that seems excessive for your business type, it’s a risk. Similarly, claiming 100% business use of a vehicle when your mileage seems implausibly high can trigger questions. Example: Writing off every dinner as a “business dinner” or claiming your personal car is exclusively a business vehicle (with no commuting or personal miles) can invite an audit, as substantiation will be required.
Home Office Deduction: The home office deduction (Form 8829) is often cited as a potential red flag. While it’s absolutely legitimate if you meet the strict requirements (a dedicated space used regularly and exclusively for business), the IRS tends to scrutinize home office claims because people sometimes stretch the rules. Particularly before 2018 (when employees could deduct unreimbursed job expenses), improper home office claims were common. Today, only self-employed individuals can claim a home office, but if one does so on a Schedule C with otherwise minimal income, the IRS may check that the space and usage actually qualify. Example: Claiming a large portion of your home as an “office” when you have a relatively small side gig could trigger questions (the IRS may ask for diagrams, photos, or proof of exclusive business use).
Round Numbers and Estimations: Returns that report many rounded numbers (e.g., $5,000 for office expenses, $10,000 for advertising, etc.) can look suspicious. While it’s fine to round to the nearest dollar, the IRS knows that perfectly round figures often indicate estimates rather than exact records. A pattern of rounded, tidy numbers in multiple categories might suggest the taxpayer is “fudging” expenses or guessing, which could prompt an audit to see if receipts back those numbers. Good recordkeeping and using actual amounts is the best defense here.
Earned Income Tax Credit and Other Refundable Credits: As noted earlier, claiming the EITC is a major audit trigger for low-income taxpayers. The IRS has special compliance filters for EITC due to historically high improper payment rates. Over half of all correspondence audits in recent years were targeted at EITC claimants. Similarly, other refundable credits (like the Additional Child Tax Credit or American Opportunity Education Credit) can draw scrutiny if the claims appear inconsistent with provided data. The IRS often requires additional documentation from EITC claimants (e.g., proof of your children’s residency and relationship) as part of these audits. Example: If a taxpayer claims the EITC for three children but the IRS’s records (or algorithms) sense something amiss (perhaps the same children’s SSNs were claimed on another return), an audit letter is likely.
High-Income Taxpayers and Complex Investments: Simply being very high income is itself a flag, in the sense that the IRS has dedicated programs to audit high-net-worth individuals. The IRS Large Business & International (LB&I) division and the specialized Global High Wealth group focus on “enterprise audits” of wealthy individuals and their related entities. As mentioned, audit rates jump dramatically once incomes exceed seven figures. High-income filers are more likely to have complex tax issues – e.g., partnerships, private foundations, foreign income – which the IRS knows can harbor non-compliance. Thus, the mantra “have money, will audit” has often applied. For instance, in 2017 individuals making over $1 million had about a 4.4% audit rate (which, while lower than in prior years, was still far above average). In short, rich taxpayers – especially those with myriad investments and businesses – should assume the IRS is more likely to take a closer look. Common issues examined include use of tax shelters, large charitable contributions (e.g. conservation easements), complex trust arrangements, etc., which are more prevalent in this group.
Offshore Accounts and International Activities: The IRS in the past decade has heavily focused on offshore tax compliance. Certain international aspects on a return can trigger an audit or at least inquiries. For example, failing to file required forms disclosing foreign bank accounts (FBAR) or foreign assets (FATCA Form 8938) can lead to penalties and audits. The IRS receives information from foreign financial institutions and will check if you reported the income. The IRS’s enforcement “priority areas” have included offshore tax evasion; in 2017, taxpayers with international features on their returns had about a 5.2% audit rate. Triggers in this realm include large foreign tax credits, claiming the foreign earned income exclusion, participation in offshore partnerships, or any transaction flagged as an abusive offshore scheme. The IRS even runs compliance campaigns targeting specific international issues (like offshore cryptocurrency transactions or secret accounts). If your return includes significant international transactions, it stands out and may face extra scrutiny.
Abusive Tax Shelters and “Listed Transactions”: The IRS annually publishes the “Dirty Dozen” tax scams and schemes, and involvement in any of those can trigger an audit. Prominent examples are syndicated conservation easements, abusive micro-captive insurance arrangements, or other tax shelters that have been designated as “listed transactions.” The IRS actively audits taxpayers who participate in these arrangements – often via specialized units. If you claimed large tax deductions or credits from a known tax-avoidance scheme (for instance, a $100,000 charitable deduction from a syndicated conservation easement investment), expect a high likelihood of examination. The IRS also has filters for transactions like large 1031 like-kind exchanges or certain loss-generating transactions that don’t have economic substance. In recent years, while the number of audits in this category was not large, it remains a priority and can lead to extensive audits (sometimes coordinated, involving many taxpayers from the same promoted scheme).
Questionable or Unqualified Tax Preparers: The IRS sometimes initiates audits as part of enforcement sweeps against unscrupulous tax preparers or promoters. If your tax preparer is under investigation, the IRS may audit many of the returns that preparer filed to uncover patterns of fraud. For example, if a preparer is suspected of inventing false deductions or credits for clients, the IRS could pull dozens of that preparer’s clients’ returns for audit. From the taxpayer’s perspective, this is a trigger you can’t see on your return, but it underscores the importance of using reputable, ethical tax professionals. Similarly, investing in a scheme sold by a promoter (e.g., a bogus “tax shelter” investment) can put you in the IRS’s sights when they crack down on that promoter.
“Large, Unusual, or Questionable” Items: A guiding audit principle in the IRS exam manual is to look for large, unusual, or questionable items on a return. This isn’t one specific line item, but rather anything that jumps out due to size or nature. Examples might include a very large bad debt deduction, a sizeable casualty loss, an unusual tax credit claim, or inconsistencies (like high income but zero tax liability due to aggressive deductions). Tax examiners are trained to spot these anomalies. Internally, they call them "LUQIs, pronounced luckys)If something on your return is significantly out of the ordinary and not well-explained, it could be pulled for review. In court cases, we often see that audits were triggered because the taxpayer claimed something that just begged for proof (e.g., a very large unreimbursed employee expense in a year prior to 2018, or an alimony deduction without corresponding income on the other party’s return).
This list is not exhaustive – the IRS employs a variety of data-driven rules and also conducts whistleblower-initiated audits (tips from third parties) in some cases. But these are among the most commonly cited audit triggers. Taxpayers should note that having one of these does not guarantee an audit; it only increases risk. The key is that if you fall into one of these categories, be sure to keep thorough documentation. Many of these items are perfectly legal to claim (for instance, business expenses, home office, large charitable gifts), but you must have proper records to substantiate them in case the IRS asks. Essentially, anything that is a significant outlier on your return should be well-supported, as those are the things the IRS is most likely to question.
Recent Trends and Future Audit Outlook
Recent trends (last 3–5 years): IRS audit rates have been on a declining trend for over a decade, hitting lows in the late 2010s. Budget cuts and loss of experienced examiners led to a steep drop in enforcement activity. To illustrate, the audit rate for individual returns fell by about two-thirds from 2011 to 2018 (0.9% to 0.3%). The decline was especially pronounced for high-end taxpayers and complex returns: in 2011, over 7% of millionaires were audited, but by 2018 only ~1.6% were. Large corporations saw audit odds fall from ~84% in 2011 to 57% by 2018 as noted earlier. By FY 2020, overall individual audit rates bottomed out around 0.25% (1 in 400) during the pandemic. The IRS was auditing fewer returns overall, and focusing what audits it did conduct on easier correspondence exams (often targeting low-income credit claims). Indeed, FY 2021 saw a slight uptick in total audits (659k audits, up from 453k the year prior), achieved largely by increasing mail audits of EITC filers. This strategy kept overall audit numbers from falling further, but meant a greater proportion of audits were on low-dollar returns rather than complex high-dollar cases. The IRS itself acknowledged that resource constraints limited its ability to address high-end noncompliance during these years.
Most recent data: The IRS Data Book for FY 2022 (covering tax year 2018 final audits and 2019/2020 interim) confirms audit coverage at historical lows for most categories. For 2018 returns (the last year fully closed), only 0.3% of individuals were audited, including ~9.2% of those over $10M income. Partnerships were at 0.1%; corporations overall 0.6%. One notable data point: among low-income EITC filers, about 1.0% were audited in 2018, compared to just 0.2–0.3% of moderate-income non-EITC filers. This disparity gained public attention and prompted calls for more balanced enforcement. By tax year 2019, preliminary audit rates remained extremely low for incomes under $500k (~0.1–0.2%), while audits for $10M+ incomes were around 2% at initial count but rising to ~11% as audits completed. The IRS closed about 582,000 audits in FY 2023 (for various years), a further drop from 708,000 in 2022. In summary, the late 2010s into 2021 saw audit odds for the average taxpayer reach their lowest point in decades.
Future outlook: Looking ahead, there is consensus that audit rates for large corporations, wealthy individuals, and complex entities will rise in the near future, while audit rates for typical households will likely remain at their current low levels. This expectation is driven by the Inflation Reduction Act of 2022, which infused the IRS with roughly $80 billion in additional funding over ten years, including ~$45 billion earmarked for enforcement. The Treasury Secretary and IRS leadership have been explicit about how this will be used: new enforcement resources are to be focused on high-income and high-wealth individuals, large corporations, and complex partnerships, not on low- or middle-income filers. In a 2023 statement, the IRS emphasized it has “no plans to increase the audit rate for households making less than $400,000” and will concentrate on wealthy taxpayers who are not paying what they owe. IRS Commissioner Danny Werfel affirmed that audit rates for sub-$400k incomes will not exceed the historically low 2018 levels in coming years. This means, for example, the audit rate for a taxpayer under $400k income will be kept around 0.2–0.3% or so (as it was in 2018), barring any major changes.
On the other hand, unless DOGE puts a stop to it, the IRS will be hiring thousands of agents and specialists (including revenue agents, attorneys, and data scientists) to bolster high-end audit capacities. We can expect increased audits of millionaires, billionaires, and large pass-through entities as this ramp-up occurs. The IRS Strategic Operating Plan outlines initiatives to use advanced data analytics to identify high-risk noncompliance among complex returns. Enforcement campaigns on areas like partnerships (which have been historically under-audited) are likely to intensify. Treasury officials have indicated the goal is to rebuild audit rates for top wealth holders closer to historical norms (though that will take time). Some projections by experts suggest that within a few years, audit rates for >$5M income and large corporations could roughly double from recent lows, moving back toward pre-2010 levels, assuming the funding is sustained.
It’s important to note that the actual deployment of the new IRS funds has become a topic of political debate, and there have been proposals to redirect or reduce the enforcement budget. But as of the most recent guidance, the IRS is moving forward with hiring and training aimed at high-end audits. The initial impact may be slow (audits of complex returns can take a year or more to initiate and complete), but by the later 2020s we should see an uptick in audit activity for the wealthy and big businesses. Average taxpayers are unlikely to notice any increase in audit likelihood – if anything, the focus on complex returns means the IRS is less likely to audit simple returns just to bump up numbers. In fact, the National Taxpayer Advocate has urged the IRS to shift attention away from low-income correspondence audits (which yield little revenue and burden vulnerable taxpayers) and toward high-dollar cases.
Expert consensus: Tax professionals generally advise that for ordinary wage earners and small businesses, the audit risk will remain low in the near future, but no one is entirely “safe” from potential audit – especially if red flags are present. The best approach is continued diligence in compliance: report all income, claim only legitimate deductions/credits, and maintain documentation. For those in higher income brackets or with aggressive tax positions, be aware that the IRS is gearing up to scrutinize complex returns more closely. Audit rates that were anemic (e.g. ~1% for millionaires) could rise modestly as the IRS rebuilds. We might see, for example, the audit rate for >$1 million incomes climb back to a few percent, and for >$10 million incomes perhaps into the teens (still below early 2010s levels, but higher than the recent trough).
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