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IRS Audit: What Triggers One and How to Protect Yourself

What triggers an IRS audit, how to reduce your risk, what happens during an audit, and how to respond. Plus your rights as a taxpayer during the audit process.

By Taxation.ai Team | | Updated February 10, 2025

Audit Odds

The overall individual audit rate is approximately 0.4% (about 1 in 250 returns). However, certain factors significantly increase your odds.

Common Audit Triggers

  • High income: Returns with income over $200,000 are audited at 2-3x the average rate
  • Large deductions relative to income: Deductions that seem disproportionate flag your return
  • Self-employment income: Schedule C filers are audited more frequently
  • Round numbers: Reporting exactly $5,000 in charitable donations looks estimated, not tracked
  • Home office deduction: While legitimate, this deduction receives extra scrutiny
  • Large charitable deductions: Especially non-cash donations
  • Unreported income: If your return does not match your 1099s and W-2s
  • Foreign accounts: FBAR and FATCA non-compliance
  • Excessive business losses: Especially if losses are claimed year after year
  • Cash-intensive businesses: Restaurants, retail, and service businesses

    • Types of Audits

  • Correspondence audit: IRS sends a letter requesting documentation for specific items. Most common type.
  • Office audit: You visit an IRS office with your records. More thorough.
  • Field audit: An agent visits your home or business. Most comprehensive and serious.

    • How to Protect Yourself

  • Keep records for at least 3 years (6 years if you underreported income by more than 25%)
  • Report all income even if you did not receive a 1099
  • Avoid round numbers - report exact amounts
  • Document everything with receipts, logs, and records
  • File electronically to avoid data entry errors
  • Be consistent year to year in your deductions
  • Use qualified tax preparation software or a professional

    • Your Rights During an Audit

  • Right to professional and courteous treatment
  • Right to privacy and confidentiality
  • Right to know why the IRS is asking for information
  • Right to representation by a tax professional
  • Right to appeal disagreements

    • Taxation.ai's AI-powered review checks your return against known audit triggers and flags potential issues before filing.

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