There are few things taxpayers dread more than getting audited by the IRS. But is this fear justified? Just what are the chances you’ll be audited?

In 2014, the IRS audited 0.86% of all taxpayers, the lowest rate in over a decade. The IRS performed fewer audits than in 2013, when the overall examination rate was 0.96.%.

However, the 0.86% number is a bit misleading. Your odds of getting audited vary according to your income. Those with higher incomes are audited more often. Taxpayers with incomes over $200,000 had a 2.71% audit rate; while those with incomes over $1 million were audited 7.5% of the time. In contrast, taxpayers making less than $200,000 had only a 0.78% audit rate, and the vast majority of these exams were less thorough correspondence audit.

The IRS uses sophisticated software to decide upon which returns to audit. Your odds of getting audited go way up if, for example:

  • your deductions are unusually large for your income
  • your deductions are peculiar–—for example, a plumber deducts the cost of a European vacation as a business expense
  • you have a money-losing business
  • you have a lot of hot-button deductions such as substantial charitable deductions, large mileage deductions or deductions for travel, and entertainment expenses, or
  • you have a business that deals with a lot of cash.

Thus, the only sure way to avoid getting in trouble with the IRS is to pay what you owe.

Stephen Fishman

Stephen Fishman

Stephen Fishman is a self-employed tax expert and regular contributor to MileIQ. He has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for entrepreneurs, independent contractors, freelancers and other self-employed people. He is the author of over 20 books and hundreds of articles, and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Visit Fishman Law and Tax Files for more information on his work.
Stephen Fishman