How likely is it that I will be audited by the IRS?

The IRS conducts audits to ensure that taxpayers are complying with the tax laws and regulations. 

The IRS audited 1.1% of all individual taxpayers in 2018. The audit rate for businesses was 0.5%. 

While the audit rate has been declining in recent years, it’s still a good idea to be prepared in case you are selected for an audit. 

If you are audited, the first thing you should do is seek professional help from a tax accountant or CPA. They will be able to guide you through the process and help you minimize your tax liability. 

In this article, we will take a look at the IRS audit process and what you can do to prepare for it.

What is an IRS Audit?

An IRS audit is an in-depth review of your individual or business tax return. An IRS audit typically involves verifying the information on a tax return, including income, deductions, and credits. The IRS may also decide to fine or assess additional taxes if it finds any discrepancies or errors. The IRS selects who they audit based on a number of criteria, such as reported income, the accuracy of deductions, failure to file taxes, or other suspicious activity. The IRS also has certain enforcement activities, such as criminal and civil investigations that involve auditing.

How likely are you to be audited by the IRS?

The good news is that the overall audit rate is relatively low, with about 1% of all individual taxpayers in 2018 being audited, and 0.5% of all businesses. However, certain factors can make you a lot more likely to be audited. Self-employed individuals and business owners may be at a greater risk of being audited as the IRS is more likely to challenge their deductions since they are more likely to take excessive deductions. Other factors that can increase your chance of being audited include-

• being a high-wealth individual
• having substantially more deductions than average
• gross negligence in reporting income or filing the return.

What should you do if you are selected for an audit?

If the IRS selects you for an audit, the first thing you should do is seek professional advice. A tax attorney or CPA will be able to guide you through the process and help you minimize your tax liability. You should contact the IRS first to get an appointment and also check your records as you will need to provide evidence and/or documentation of all income, expenses, deductions, and credits you have claimed.

What is the IRS looking for?

The IRS is looking to identify any discrepancies in the information reported on a taxpayer’s tax return. They are also looking to ensure that the taxpayer is reporting their income accurately and paying the necessary taxes. The IRS will also examine deductions and other tax credits, as well as look for any potential evidence of tax evasion.

Types of audits

How to avoid being audited

The best way to avoid an audit is to file accurate and complete tax returns. Make sure to report all of your income and take only legitimate deductions. You should also make sure to keep all of your tax records and documentations and be prepared to provide them to the IRS if needed.

Should you hire a tax professional?

Hiring a tax professional can be beneficial, as they will be knowledgeable about the IRS’s tax regulations and be able to offer sound advice when it comes to taxes and auditing. They can also help you avoid making mistakes that could lead to an audit.

How to prepare for an audit

If you are selected for an audit, the first thing you should do is seek professional help. Assemble all of your documentation, from income tax returns to receipts and canceled checks, and have them readily available. You should also have copies of the documents you are presenting to the IRS, as they may need to keep them on file. 



Additionally, if you’ve had any significant changes in your financial situation since the time the return was originally filed, make sure to update the IRS on those details.

What to do if you can’t pay

If the audit reveals additional taxes you owe, the IRS will typically provide you with options for how you can pay the amount. These may include installment plans, an offer in compromise, or a partial payment plan. Make sure to discuss all of your options with a tax professional.

What to do if you disagree with the findings

If after reviewing the documents and information provided you still disagree with the audit’s findings, you can file an appeal with the IRS. During the appeal, a settlement officer or IRS appeals representative will review the audit and make a decision. You can also request a Tax Court hearing if you disagree with the settlement officer or representative’s decision.

After the audit

Once the audit is complete, the IRS will issue a final determination in writing. This letter will tell you whether or not you owe taxes, and if so, how much. You will then have to pay the amount due in full or set up an installment plan to pay over time. It’s important to note that the taxes due must be paid, regardless of if you agree with the audit’s results or are still in the process of appealing. 

Closing Statement

The IRS audit process can be intimidating but by understanding what goes into it and having all the necessary documentation, you can prepare for it in advance. If you are selected for an audit, the first step should be to seek professional help from a tax accountant or CPA. Call our team on (817) 238 0100. We will guide you through the process and help you minimize your tax liability.