Nobody wants to see an IRS letter in their mailbox, especially one that starts with “We are examining your tax return.” The good news? Getting audited isn’t as scary as it sounds, and most people who get selected did something specific that caught the IRS’s attention.

Even better news: audit rates are still incredibly low. Only about 0.4% of individual tax returns get examined – that’s fewer than 1 in 200 people. But if you want to stay out of that tiny group, understanding what triggers audits can help you file smarter and sleep better.

What Actually Triggers an IRS Audit?

The IRS uses computers to compare your tax return against statistical “norms” for people in similar situations. If something looks unusual compared to others with your income and circumstances, you might get flagged for a closer look.

Here’s what typically catches their attention:

Missing Income (The #1 Red Flag)

This is the easiest way to get audited. The IRS gets copies of all your W-2s and 1099s, so if you “forget” to report that $3,000 freelance payment, their computers will catch it immediately.

What happens: You get a letter (not technically an audit) asking for the missing taxes plus penalties and interest. Miss a $5,000 1099? Expect to owe around $1,500+ in taxes and penalties.

Math Errors and Round Numbers

Using nice round numbers everywhere screams “I estimated this.” If your return shows $400 in tips, $850 in student loan interest, and $100 in medical expenses, the IRS computers flag this pattern.

Better approach: Report actual amounts. Tips of $387, student loan interest of $847, medical expenses of $97 looks much more legitimate.

Huge Deductions Compared to Your Income

Claiming $70,000 in charitable donations when you make $100,000 will definitely get attention. The IRS knows the average charitable deduction for each income level, and anything way above normal gets flagged.

Example: If you make $75,000 and claim $15,000 in business expenses, that’s 20% of your income. Better have excellent records to back that up.

Warning: These Situations Almost Guarantee Extra Scrutiny

High earners: Make over $400,000? Your audit chances jump dramatically. The IRS is specifically targeting high-income taxpayers with their increased funding.

Cash businesses: Own a restaurant, hair salon, or any business that deals mostly in cash? The IRS assumes you might not be reporting everything and watches these returns closely.

Home office deductions: Claiming you use 30% of your home exclusively for business when you make $40,000 a year? Be ready to prove it. The bigger the home office percentage, the higher your audit risk.

Cryptocurrency transactions: The IRS now specifically asks if you bought or sold crypto. Answer “yes” and they’re watching for unreported gains.

Earned Income Tax Credit (EITC): Despite being a credit that helps lower-income families, EITC claims have a 5.5 times higher audit rate than other returns due to frequent errors.

Smart Ways to Avoid Unwanted Attention

✅ Report Everything

Even if you didn’t get a 1099 for that $500 side job, report it. The IRS might get that information later, and unreported income creates way bigger problems than just paying the tax upfront.

✅ Keep It Realistic

Don’t claim deductions that are wildly out of proportion to your income. A $100,000 earner claiming $25,000 in business meals better have a really good explanation.

✅ Double-Check Your Math

Use tax software or a calculator instead of estimating. One addition error can delay your refund and potentially trigger an audit.

✅ Be Consistent Year-to-Year

Suddenly claiming $20,000 in business expenses when you’ve never claimed more than $2,000 before will raise questions. Big changes need good explanations.

✅ Avoid Estimation and Rounding

Report actual amounts, not round numbers. Your gas receipts add up to $1,847, not $1,850.

If You Do Get Audited: The 5-Step Survival Plan

Step 1: Stay Calm An audit doesn’t mean you did anything wrong. Most audits are just requests for documentation to verify what you claimed.

Step 2: Read the Letter Carefully The IRS will tell you exactly what they want to see. Don’t send extra documents – stick to what they requested.

Step 3: Organize Your Records Put everything in order by category and year. Create a simple summary showing how your records support what’s on your return.

Step 4: Respond on Time You typically get 30 days to respond. If you need more time, call the number on the letter – they usually grant a one-time 30-day extension.

Step 5: Consider Getting Help If the audit involves significant money (over $5,000 in potential taxes) or complex issues, hire a tax professional. They can represent you and know how to handle IRS procedures.

What Records to Keep (And for How Long)

Keep for 3 years minimum:

• All tax returns and supporting documents
• W-2s, 1099s, and other income statements
• Receipts for deductions you claimed
• Bank statements and canceled checks

Keep for 6 years if:

• You failed to report income worth 25% or more of what you did report
• You have foreign assets over $5,000

Keep forever:

• Records of property purchases (basis for calculating gains when you sell)
• Records of home improvements (can reduce capital gains when you sell)

Real example: You buy a house for $300,000 and spend $50,000 on improvements over 10 years, then sell for $450,000. Without those improvement records, you’d owe capital gains tax on $150,000 instead of $100,000 – costing you around $7,500 in unnecessary taxes.

The Bottom Line on Audit Protection

Most audits happen because people make obvious mistakes or try to push the boundaries too far. The IRS isn’t out to get you – they’re looking for actual errors and unreported income.

Your best protection is simply being honest and accurate. Report all your income, keep good records, and don’t claim deductions you can’t prove. If you do get audited, organized records and truthful answers will get you through it just fine.

Remember: The IRS is getting better technology and more funding, so sloppy tax preparation that might have slipped by before is more likely to get caught now. But if you’re filing honestly and accurately, you have nothing to worry about.

The audit process usually takes less than a year, and most happen by mail rather than face-to-face meetings. With good documentation, even an audit often results in no additional taxes owed.

Don’t let fear of an audit stop you from claiming legitimate deductions. Just make sure you can back up everything you claim with proper documentation.

Key Takeaways

• Only 0.4% of tax returns get audited – your chances are extremely low if you file accurately

• Missing income and round numbers are the biggest red flags that trigger audits

• Keep detailed records for at least 3 years, longer for property and significant unreported income

• Most audits are correspondence (mail) audits asking for documentation, not face-to-face meetings

• Being honest and organized is your best protection – the IRS is looking for actual errors, not honest mistakes