Many taxpayers fear getting audited by the IRS. Here are the odds based on your income.
IRS Audits help the agency collect money that tax cheats owe the federal government, but experts say they also serve another important purpose: They help deter fraud.
That can cause some serious agita, of course. The IRS says about 6 in 10 taxpayers cite the anxiety of getting audited as a motive for being honest on their taxes.
Meanwhile, the IRS has vowed to increase audits on taxpayers with annual income over $400,000 as a way to raise revenue and crack down on tax dodgers, funded by the Inflation Reduction Act. After the 2022 law was passed, roughly a quarter of voters expressed concern about getting hit with an audit, according to Morning Consult research.
So what are the odds of getting audited? Very low. Only 0.2% of all individual income tax returns filed for the 2020 tax year faced an audit, according to the most recent data available from the IRS. That means about 1 in 500 tax returns are audited each year.
To be sure, some people face higher audit risks than others, and one of them might surprise you. The taxpayers most likely to be audited are those with annual incomes exceeding $10 million — about 2.4% of those returns were audited in 2020. But the second most likely group to get audited are low- and moderate-income taxpayers who claim the Earned Income Tax Credit, or EITC.
Why can the EITC trigger an audit?
The higher audit rate for people who claim the EITC has sparked criticism from policy experts. The Bipartisan Policy Center notes that these examinations tend to disproportionately fall on people of color, partly because they are more likely to qualify for the tax credit.
People can claim different amounts through the EITC based on their income and their number of dependent children. For instance, a married couple filing jointly with three kids and less than $63,398 in income can claim the maximum EITC amount, at $7,430. But the most a single taxpayer with no kids can claim is $600.
EITC returns can get flagged if the IRS’ records show the taxpayer doesn’t qualify for all or some of the credit, such as claiming a child who isn’t actually eligible (which can happen if they’re over 19 and not a full-time student). About 8 in 10 audited returns that claimed the EITC had either incorrectly claimed a child or misreported income, the National Taxpayer Advocate noted in a 2022 report.
Still, these audits are slightly different than the kind a wealthier taxpayer would typically face. The IRS relies on so-called “correspondence audits” to handle EITC issues, which are handled via letters and phone calls, rather than in-person visits from an IRS agent, or how audits are handled with high-income taxpayers.
Are taxpayers more or less likely to get audited these days?
Quite the opposite. In fact, the audit rate has been declining for years, according to IRS data.
For instance, the agency in 2014 audited about 9.4% of all tax returns for people earning more than $10 million a year — that’s almost four times the present audit rate, IRS data shows.
Middle-class taxpayers are also much less likely to get audited today. IRS figures show that the audit rate for people with annual income of $50,000 to $75,000 was 0.4% in 2014 — also four times higher than the current audit rate.
The reason, the IRS says, is partly due to its shrinking workforce. In fiscal year 2022, the agency had about 79,000 full-time equivalent workers, a 9.1% decline from 2013. But the IRS is now beefing up its staff, thanks to Inflation Reduction Act funding, and it says that it is focusing on increasing audits for those earning above $400,000.
