The possibility of the IRS examining your tax returns generally depends on income level and filing type. The more complex your tax returns, the higher the chances of facing an audit. The more basic the tax return, the lower the chance of scrutiny.
Generally speaking, most returns are randomly selected for audit. That being said, if your tax return has unusual deductions or omissions, IRS may warrant further examination by the tax authority.
Your chances of hearing from the IRS escalate when you claim unusual tax breaks, huge losses, or, most importantly, foreign assets.
For example, independent contractors receive Form 1099 MISC for their services when they are paid more than $600. A copy of this form is also submitted to the IRS. If the income from 1099 MISC does not match with that of the IRS, it may trigger an audit.
To get a clear picture, let’s look at certain statistics released by the IRS for each type of entity.
IRS AUDIT RATES BY INCOME LEVEL FOR INDIVIDUALS (2018)
| Income level | Percentage audited |
| $0 | 2.04 % |
| $1 to $25000 | 0.69% |
| $75000 – $100,000 | 0.45% |
| $100,000- $200,000 | 0.45% |
| $10,000,000 or more | 6.66% |
IRS AUDIT RATES/STATISTICS BY TAX FILING TYPE FY (2018)
| Percentage Audited | |
| Small Corp | 0.6% |
| Large Corp | 8.1% |
| S Corp | 0.2% |
| Partnership | 0.2% |
| Individual | 0.59% |
| Estate tax returns | 8.33% |
| Employment Tax returns | 0.2% |
Further, estate returns often have very good returns for the IRS. The IRS audits 100% of estates over $10M, 58% $5M-$10M and 14% under $5M.
The odds of being audited have decreased significantly over the last few years. The reasons include:
- Decline in the IRS’ budget
- Reduction in the IRS’ workforce
- Increase in the IRS’ workload
According to the IRS Oversight Board, the IRS does not have the resources pursue at least $30 billion worth of incorrectly reported or unpaid taxes. The nation’s “tax gap”—that is the difference between what taxpayers actually owe and what they voluntarily pay—was most recently estimated at $458 billion.
