Audits are one of the main tools the IRS uses to ensure that it's being paid the right amount of income taxes.
With roughly a month left to go until Tax Day, a lot folks out there have already gotten their returns sorted, and based on the stats, a lot of them are probably at least a little worried about audits.
Audits are among the IRS's best-known activities and they represent a key way in which the agency is able to claw back money that's owed by certain taxpayers. Despite the common notion that an audit might result in you owing more money, however, sometimes the corrections made by one can increase the amount you receive in a refund.
The IRS' own research has found that a majority of taxpayers, roughly 60% of them, expressed anxiety over the possibility of being audited, citing it as a major reason why they're honest when filing taxes. Nowhere near that percentage of people are actually audited, as you'll read later, and those reporting a standard middle income have even less to worry about.
For more tax coverage, find out if you're eligible for the child tax credit and see if your state has its own version of the credit.
What is an audit?
When the IRS conducts an audit, it reviews the "books, accounts and financial records" of an individual or organization in order to ensure that the income and other information they reported on a tax return were accurate, according to the agency's website.
Sometimes an audit can be as simple as the IRS letting you know that a few more documents are needed to complete your return -- known as a correspondence audit. When no additional materials are needed and it's been determined that you either owe a bit more or are owed a bit more in your tax refund, this is known as an adjustment letter. More intensive audits, which require you to provide all documents pertaining to your financial situation, are known as examination audits.
Who gets audited?
Individuals or organizations can be audited for any number of reasons. The IRS site stresses that you don't even necessarily have to have made any errors to get audited: They can be initiated at random or because someone affiliated with you, like a business partner, is being audited.
Still, for those who do get audited, it's most often because of errors or discrepancies in your tax filings. Any sort of error or missing piece of documentation in your tax return makes it likelier that you'll get audited. The likelihood of this happening to you overall is still very low, with CBS reporting that only 0.2% of Americans were audited in 2020.
Reporting more income on your taxes increases the likelihood that you'll get audited, with a Syracuse University study from 2023 finding that in 2022 those in the millionaire tax bracket had the highest odds of being audited at 1.1%. The same study also found that, conversely, those making less than $25,000 and claiming earned income tax credits were also audited at a higher rate than middle income earners.