Understanding Your Audit Risk in 2025

IRS Tax Audit Risk: Will the IRS Flag Your Return?

Our interactive Tax Audit Risk Calculator helps you understand your potential audit risk by analyzing the key factors the IRS uses when selecting returns for examination. This tool is based on recent IRS audit statistics and known risk factors from 2019-2024.

What Your Risk Score Means

Our calculator examines your specific tax situation across multiple risk factors to estimate your relative audit risk. While no tool can predict with certainty whether you’ll be audited, understanding where you stand can help you file with confidence or identify areas where additional documentation or professional assistance with an audit might be valuable.

Low Risk (0-30%)

You have relatively few audit triggers compared to the general population. While this doesn’t guarantee you won’t be audited, your return contains fewer elements that typically attract IRS attention.

Medium Risk (31-60%)

Your tax situation includes some factors that might increase audit likelihood. Consider reviewing your documentation for any high-risk areas identified and ensure you can substantiate all claims if questioned.

High Risk (61-100%)

Your return contains multiple factors known to trigger IRS scrutiny. This doesn’t mean you’ve done anything wrong, but you should be prepared with thorough documentation for all items on your return. Professional tax assistance may be valuable given your risk profile.

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IRS Audit Risk Factors Table

Risk Factor	Description	Notes
Unreported Income or Mismatches	Income not matching IRS records (W-2, 1099, K-1, etc.).	Most common trigger; detected via computer matching.
High Income	Earning $1M+ annually increases audit probability.	Top 1% face higher audit scrutiny, especially >$5M.
Not Filing Required Returns	Failing to file when required (non-filer).	IRS Substitute for Return (SFR) program targets this.
Excessive Deductions or Credits	Deductions or credits unusually large vs. income.	Compared against statistical norms by IRS DIF system.
Large Charitable Donations	Donations far above average for income level.	May trigger request for substantiation or appraisal.
Schedule C Losses (Hobby Loss Rule)	Multiple years of business losses; suspected hobby.	IRS challenges if no profit motive is proven.
Cash-Intensive Business	Businesses with high cash volume (e.g., restaurants).	Subject to income probes and indirect methods.
Mixing Personal and Business Expenses	Personal costs deducted as business expenses.	Vehicle, meals, and home office deductions scrutinized.
Rental Real Estate Losses	Claiming large rental losses to offset income.	Requires real estate professional status to be allowed.
Claiming Refundable Credits	EITC, CTC, education or health credits.	High error rate; often targeted in correspondence audits.
Early Retirement Distributions	Unreported or improperly exempt early IRA/401(k) withdrawals.	IRS matches against 1099-R forms.
Alimony Deductions	Deduction claimed but recipient didn’t report income.	Only allowed for pre-2019 divorce agreements.
Gambling Winnings/Losses	Winnings not reported or large loss deductions.	Losses must not exceed winnings and must be substantiated.
Foreign Income and Assets	Unreported foreign accounts or income.	FBAR and FATCA enforcement area.
Cannabis or Federally Restricted Businesses	State-legal businesses still illegal federally (e.g. cannabis).	IRC §280E disallows most deductions.
Aggressive Tax Shelters	Participation in syndicated easements, micro-captives.	IRS issues special notices and audits these.
Virtual Currency Transactions	Crypto income or trades not properly reported.	IRS uses blockchain tracking tools to verify activity.
Round Number or Estimated Figures	Many deductions end in 0s or 5s (suggesting estimates).	May raise suspicion of non-documentation.

The IRS doesn’t randomly select most returns for audit. Instead, they use sophisticated algorithms and scoring systems to identify returns with potential issues. Key risk categories include:

Why Audit Risk Matters

Being selected for an IRS audit can be stressful, time-consuming, and potentially costly. Understanding your risk factors puts you in a better position to:

📝 1. Prepare proper documentation for potential audit triggers on your return.

💵 2. Make informed decisions about claiming certain deductions or tax credits.

ℹ️ 3. Know if and when working with a professional tax attorney will be valuable.

📨 4. File your tax returns with confidence knowing your relative IRS audit risk.

Answers to Frequently Asked Tax Audit Questions

How are tax returns selected for audit?

The IRS picks tax returns to look at in a few main ways. First, they use a computer system that compares your tax return to what’s normal for people who make about the same money as you. If your deductions or credits seem really different from what most people claim, the computer flags your return. Second, the IRS checks what you reported against the information they got from your employer or bank. If you say you made $30,000 but your job reports paying you $35,000, you’ll likely get a letter. Third, if someone connected to you gets audited – like your business partner or someone who paid you a lot of money – the IRS might look at your return too. Finally, a small number of people get picked completely at random, but this doesn’t happen very often.

How far back can the IRS audit me?

Generally, the IRS has three years from the filing date to audit a return. However, this extends to six years if you’ve omitted more than 25% of your income, and there’s no time limit for fraudulent returns or unfiled returns.

Does amending my return increase audit risk?

Filing an amended return doesn’t automatically trigger an audit, but certain amendments (like claiming new deductions or significantly changing reported income) might increase scrutiny. Always file amendments if needed to correct errors, regardless of audit concerns.

What happens if I'm audited?

If selected for audit, you’ll receive written notification from the IRS specifying what items they’re examining and what documentation they need. Audits typically take one of three forms:

1. Correspondence audit (by mail)
2. Office audit (at an IRS location)
3. Field audit (at your home, business, or accountant’s office)

Should I respond to an IRS notice myself?

For simple notices or correspondence audits involving straightforward issues, many taxpayers successfully handle the process themselves. For complex situations, significant amounts, or if you’re uncomfortable with the process, professional representation often proves valuable.

Tax Audit Information to Explore: