What happens during an IRS audit?

The IRS reviews your tax return for accuracy. Most audits (75%) are correspondence audits — conducted entirely by mail. The IRS asks you to verify specific items (deductions, income, credits) by providing documentation. If you can prove your claims, the audit is closed with no changes. If not, you may owe additional taxes, penalties, and interest.

How likely is it to get audited?

The overall audit rate is about 0.4% (4 in 1,000 returns). Higher-income taxpayers, self-employed individuals, and those claiming large deductions relative to income are more likely to be audited. Earning over $1 million increases your audit rate to about 1-2%.

What triggers an IRS audit?

Common triggers include: math errors, unreported income (the IRS has your W-2s and 1099s), unusually large deductions for your income level, home office deductions, large charitable donations, consistently reporting losses on Schedule C, filing an amended return, and random selection.

What Happens If You Get Audited by the IRS?

Most IRS audits are handled by mail, take 3-6 months, and result in either no change or a modest adjustment. Only 0.4% of returns are audited, and the process is far less dramatic than people fear.

Types of IRS Audits

Audit Type	How It Works	How Common	Severity
Correspondence audit	Conducted by mail. IRS asks for specific documents	~75% of audits	Low
Office audit	You visit a local IRS office with documents	~20% of audits	Medium
Field audit	IRS agent comes to your home or business	~5% of audits	High

What Triggers an Audit

Trigger	Risk Level	Why
Unreported income (missing 1099/W-2)	🔴 Very high	IRS already has copies and compares automatically
Math errors	🔴 High	Often auto-corrected but may trigger review
Large deductions relative to income	🟡 Medium	DIF score flags statistical outliers
Home office deduction	🟡 Medium	Historically abused; invites scrutiny
Schedule C losses (year after year)	🟡 Medium	IRS may reclassify as hobby
Large charitable donations	🟡 Medium	Especially cash donations without receipts
Income over $1 million	🟡 Medium	Audit rate is 1-2% (vs. 0.4% overall)
Earned Income Tax Credit	🟡 Medium	High error rate on this credit
Amended return (Form 1040-X)	🟢 Low-medium	Drawing IRS attention to your return
Random selection	🟢 Low	Statistical sampling program

Audit Rate by Income Level

Income Level	Audit Rate (approx.)
Under $25,000	0.4%
$25,000-$50,000	0.2%
$50,000-$100,000	0.2%
$100,000-$200,000	0.3%
$200,000-$500,000	0.4%
$500,000-$1 million	0.6%
Over $1 million	1-2%
Over $5 million	2-4%

What Happens During a Correspondence Audit

Step	What Happens	Your Action
1	You receive IRS Letter (CP2000 or other)	Don’t panic — read carefully
2	Letter identifies specific items being questioned	Gather supporting documentation
3	You have 30 days to respond	Respond by deadline (or request extension)
4	Send copies of supporting documents	Never send originals
5	IRS reviews your response	Wait 60-90 days
6	IRS accepts, partially accepts, or rejects	Agree or appeal

Possible Outcomes

Outcome	What It Means	How Often
No change	IRS agrees your return was correct	~25% of audits
You owe more	IRS found errors; you owe additional tax + interest + penalties	~55% of audits
You owe less (refund)	IRS found you overpaid	~2% of audits
Agreed adjustment	You and IRS agree on changes	Most common resolution
Unagreed	You disagree; can appeal	You have 30 days to appeal

Your Rights During an Audit

Right	What It Means
Right to representation	You can have a CPA, tax attorney, or enrolled agent represent you
Right to know why	IRS must explain why your return was selected
Right to see evidence	IRS must show you the information they’re relying on
Right to appeal	You can appeal any IRS decision you disagree with
Right to privacy	IRS cannot discuss your audit publicly
Right to a timely resolution	IRS should complete audits as quickly as possible
Right to disagree	You can take your case to Tax Court

Penalties If You Owe More

Penalty Type	Rate
Accuracy-related penalty	20% of the underpayment
Substantial understatement (>$5K or >10%)	20% of the underpayment
Fraud penalty	75% of the underpayment
Interest	~8% annually (2026), compounding daily
Failure-to-pay (on additional balance)	0.5% per month

The Bottom Line

An audit is a document review, not a criminal investigation. Stay calm, gather your records, respond by the deadline, and hire a tax professional if the audit is complex. Most correspondence audits are resolved by simply providing documentation you should already have. If you disagree with the result, you have the right to appeal.