An IRS audit is triggered when your return stands out. The IRS selects returns through computer scoring (the DIF system), mismatches between your return and third-party records like W-2s and 1099s, related examinations of business partners, random sampling, or third-party tips. Most audited taxpayers get a letter, not a knock at the door.

How does the IRS choose which returns to audit?

Being selected does not suggest you made an error or did anything dishonest. The IRS accepts most returns as filed and examines a small fraction. Selection happens through several channels documented by the IRS in Publication 556 and on its audits page:

1. Computer scoring (DIF). A program called the Discriminant Inventory Function System assigns a numeric score to individual and some corporate returns after processing. A high score means an examination is more likely to change your tax liability. You never see your score; you only see the letter if you are selected.

2. Information matching. The IRS receives W-2s, 1099s, and other third-party documents and matches them against your return. A gap between what your broker reported and what you reported is one of the fastest ways to draw attention. Most mismatches never become audits: the IRS's Automated Underreporter program handles them by notice (typically a CP2000 proposing changes), and it closed 987,460 such cases in FY 2025, producing $5.9 billion in additional assessments, per the IRS Data Book. These cases are not counted as audits.

3. Related examinations. Your return can be selected because it involves issues or transactions with other taxpayers whose returns were selected, such as business partners or investors. This is why an audit of one partner or a partnership can widen to others involved; for partnerships under the centralized audit regime, the exam is generally conducted at the partnership level.

4. Tips and referrals. Information from newspapers, public records, or individuals can trigger an examination. The IRS evaluates the reliability of the information before using it.

The IRS audits page adds that random selection and computer screening against statistical "norms" from the National Research Program also play a role. Filing an amended return does not affect selection of the original return, and a refund is not necessarily a trigger.

What are the real audit odds at your income level?

In FY 2025, the IRS closed 497,621 examination cases, producing $26.8 billion in recommended additional tax, according to the IRS Data Book. Coverage rates climb sharply with income. For tax year 2021 (the most recent year outside the statute of limitations), individual coverage rates were:

Source: IRS Data Book, compliance presence.

The pattern is direct: as income and return complexity rise, so does the probability of examination. High earners, business owners, and equity comp holders are not the average taxpayer, and the audit odds reflect that. This is why preparation before the letter matters more than reaction after it.

What kind of audit would you actually face?

Most IRS examinations are conducted by mail (correspondence) or face to face (field), per the IRS Data Book. A correspondence audit asks you to respond to a letter and provide documentation for specific items. An in-person audit held at an IRS office is an office audit; a field audit takes place at your home, your place of business, or your accountant's or representative's office.

The full comparison, including timelines, document requests, and what to say and not say in each format, is in our guide on correspondence audits versus field audits. The short version: the letter always comes first. The IRS will not initiate an audit by telephone, per the IRS audits page. If someone calls claiming to be the IRS starting an audit, it is a scam.

How do you prepare before an audit ever happens?

The best audit defense is built years before the letter arrives. These are the habits that make examinations short and survivable:

1. Keep records for at least three years from the filing date; six years if you may have underreported more than 25% of your income; seven years for worthless-securities or bad-debt claims; indefinitely if you did not file or filed a fraudulent return; and keep basis records for investments (including RSU vesting statements) until the limitations period ends for the year you sell. The law requires it (IRS audits page), and "at least" is doing work there. The general assessment period is three years after filing (IRC §6501(a)), but it is six years if you omit more than 25% of the gross income shown or more than $5,000 of income from foreign financial assets (§6501(e)(1)(A)), and there is no limit for a fraudulent return or no return (§6501(c)). Undisclosed foreign-reporting forms such as Form 8938 or 5471 can also keep the period open (§6501(c)(8)).

2. Reconcile your information documents before filing. Match your return against every W-2, 1099, and K-1 you received. A mismatch the IRS finds draws attention, often first arriving as an automated notice proposing changes rather than a formal audit; a mismatch you find before filing and correct on the return is not a problem.

3. Document deductions as you go, not after the letter. Mileage logs, receipts, basis records for investments, and support for business expenses should be contemporaneous. Reconstructed records are weaker than real ones.

4. Know your repeat-examination protection. If the IRS examined the same items in either of the previous two years and proposed no change, contact the IRS to ask whether the new examination should be discontinued (Pub 556).

5. Arrange representation before you talk. You have the right to be represented by yourself or an authorized representative, and you can suspend most examination interviews to consult one. An enrolled agent, CPA, or attorney has unlimited representation rights before the IRS. An uncredentialed preparer can represent you only in limited cases (for a return they prepared and signed, and only if they hold an Annual Filing Season Program record), and has no rights before Appeals or Collections. Our guide explains what an enrolled agent can do in an audit that an unlicensed preparer cannot.

What traps turn a routine audit into an expensive one?

The wash sale rule. If you sell stock or securities at a loss and acquire substantially identical stock or securities within 30 days before or after the sale, the loss deduction is disallowed under IRC Section 1091. The disallowed loss is not lost: it is added to the basis of the replacement shares (and their holding period includes the time you held the shares sold), so you recover it when you later sell the replacement shares in a transaction that is not itself a wash sale. Equity comp holders who trade around vesting and exercise dates trip this rule often, and examiners know where to look.

Illustrative example: you sell 100 shares at a $5,000 loss on December 10, then buy back 100 shares of the same stock on December 28. The $5,000 loss is disallowed for the current year and added to the basis of the repurchased shares.

Divorce and filing status. When you file jointly, the law makes both spouses responsible for the entire tax liability, called joint and several liability. That liability survives divorce, even if the divorce decree says the other spouse is responsible. If you were dragged into someone else's tax mess, the IRS offers three types of relief: innocent spouse relief, separation of liability relief, and equitable relief. You request them on Form 8857. Innocent spouse and separation of liability relief must generally be filed no later than two years after the IRS first attempts to collect the tax from you, and that deadline is a real one, not a suggestion. Equitable relief follows different deadlines (IRS Pub 971): for an unpaid balance due, you can generally request it within the period the IRS has to collect the tax, usually 10 years from assessment.

Ignoring the letter. If you do not respond by the date shown, the IRS completes the audit without your input and sends proposed changes. Silence is the only response guaranteed to lose.

What happens at the end of an audit?

Every audit concludes one of three ways, per the IRS audits page:

• No change: you substantiated everything and nothing changes.

• Agreed: you understand the proposed changes and agree, then sign the examination report and pay what you owe plus interest.

• Disagreed: you understand the changes and do not agree. You can request a conference with an IRS manager, use mediation (alternative dispute resolution), or file an appeal while enough time remains on the statute of limitations.

Publication 556 also notes that many examinations end in a refund or acceptance of the return without change. An audit is a verification process, and organized, contemporaneous records give you the best chance of a no-change or minimal-change result, though adjustments can still arise from disagreements over how the law applies.

Pending review by Brian Thomas, EA. Updated September 25, 2026.

This article is free educational content, not tax advice for your specific situation. If you want a plan built around your actual numbers, that is what our paid tax planning engagements do.