What Are Your Chances of an IRS Audit?

IRS audit. Are you shaking with fear yet upon seeing those words? Most people would rather do just about anything else besides open up their finances to a close inspection from an IRS agent who has the power to order them to pay thousands of dollars in back taxes.

It's not surprising so many people are afraid of being audited. Taxes can be really confusing, so even if you try to do the right thing and pay what you owe, you may not always get it right. The fear of a mistake combined with the intrusiveness of combing through your financial life with a government agent and the risk of having to pay lots of money, including penalties, all make the idea of an audit a very scary thing indeed.

But what exactly are your chances of it happening to you? The odds of an audit are actually lower than you probably think -- except for one surprising group of taxpayers.

Here are the odds you are going to be audited

According to Transactional Records Access Clearinghouse data, a nonpartisan, nonprofit data research center affiliated with Syracuse University, the odds of an audit are really very low. In fact, you have about as much chance of this adult nightmare coming true as you did of there really being a monster under your bed when you were a child.

Specifically, the IRS audited just 626,204 out of the 164 million individual tax returns that were filed for the 2022 tax year. This was down from 659,003 during the prior year. And while this number may seem high, the vast majority of them weren't really what you typically think of as an audit, but instead involved the IRS just sending a written request for more information.

When it comes to a real audit involving an actual investigation and talking with an agent, only 93,595 of those happened in 2022. That makes the audit rate about 3.8 out of every 1,000 returns, so taxpayers have about a 0.38% chance of being audited. This was down from a 0.41% chance in 2021.

So, while you might theoretically be audited, the odds are not very high.

One group faces a much bigger risk

While the overall chances of an audit are pretty low, there's one group that actually faces a much more significant risk -- and it's not the people you might think. Surprisingly, instead of millionaires being at elevated risk of an audit, it's the lowest-income wage earners who claim the Earned Income Tax Credit (EITC).

This group of taxpayers faces nearly three-and-a-half-times the chances of an audit compared with the average individual taxpayer, largely because it's easier for the IRS to identify issues with EITC claims than it is to sort through the complex finances of millionaires. In 2022 alone, there were 12.7 audits per 1,000 returns filed by the lowest-income wage earners (making it a 1.27% chance of audit) compared with 3.8 per 1,000 returns filed by all other individual taxpayers.

This doesn't mean that you shouldn't claim this credit, as it's a valuable one for lower earners. But it does mean it's important to have the right documentation and confirm you qualify to have the money deposited into your bank account. If you use the right tax preparation software, the software will take care of most of this for you.

So, the bottom line is, the risk of an audit isn't high -- but it does exist, especially for lower earners who claim the EITC. So be sure to get the help you need to file your taxes properly -- either from a good quality tax software or from an accountant -- so you won't have anything to worry about if the IRS comes calling.