Who Does the IRS Audit Most? Millionaires and EITC Recipients

The IRS audits some taxpayers to ensure they pay what is deemed necessary. In the fiscal year 2023, the federal agency closed 582,944 audits, which resulted in $31.9 billion in recommended additional tax. 

Most IRS audits are for people who make more than $1 million per year. However, the IRS also frequently audits low-income households who claim the Earned Income Tax Credit (EITC).

IRS audits have dropped by more than 58% since 2010, but it’s best to remain vigilant. We will discuss some of the most common red flags and how to avoid getting audited by the IRS.

Table of Contents

1. IRS audit basics: How it works
2. Who gets audited the most?
3. How many people get audited?
4. What is an audit like?
5. How to reduce your chances of an audit
6. What to do if you get audited in 4 steps
7. IRS audit myths and misconceptions
8. Takeaways: Should you worry about an IRS audit?

IRS audit basics: How it works

An IRS audit is a review of someone’s financial records to ensure they match up with their tax returns. The IRS runs audits to ensure taxpayers do not underpay what the agency deems necessary.

Most people don’t get audited by the IRS: Only 2.9% of people who earn more than $10 million in adjusted gross income are audited. The IRS also audits less than 0.5% of people who earn under $1 million in adjusted gross income.

The IRS can only audit the last three years of your tax returns, but it may dig into tax returns from additional years if it detects substantial errors. The IRS typically conducts audits on returns filed within the past two years. 

Who gets audited by the IRS the most?

The IRS usually audits wealthy millionaires and people who use the earned income tax credit. It also looks at self-employed workers who report much higher or lower income in one year compared to previous years. 

The following factors can increase the likelihood of an IRS tax audit:

• Any large or unusual deductions
• Offshore accounts
• Many crypto transactions

Last year, the federal agency stated that it plans to increase the audit rates of taxpayers who earn $10 million or more from 11% in the 2019 fiscal year to 16.5% in the 2026 fiscal year. The IRS is also enhancing its computer models to audit more high-income taxpayers.

The IRS Data Book from 2023 shows how many people are audited based on their annual income. These were the findings:

Adjusted gross income range	Percent audited
$0	0.3%
$1 – $25,000	0.4%
$25,000 – $50,000	0.2%
$50,000 – $75,000	0.1%
$75,000 – $100,000	0.1%
$100,000 – $200,000	0.1%
$200,000 – $500,000	0.1%
$500,000 – $1 million	0.3%
$1 million – $5 million	0.5%
$5 million – $10 million	1.4%
$10 million or higher	2.9%

Taxpayers should document all claimed deductions with consistent records. For business expenses, a simple system—like noting client lunches in a calendar—works if expenses match recorded dates. Using apps like Hurdlr or QuickBooks to store receipt photos makes tracking easier. If claiming many more deductions than in previous years, keep receipts as proof. 

For medical expenses, keeping all bills in one file simplifies year-end organization. One year when my son broke his elbow, we had numerous doctor visits and surgeries. I kept everything in one file folder, and at the end of the year, I was able to consolidate my records for the CPA.

Whether tracking business expenses, medical costs, or crypto transactions, the key is consistency. A clear, organized system ensures accuracy and helps avoid IRS scrutiny.

How many people get audited? IRS audit trends and changes

The IRS closed 582,944 tax return audits in the fiscal year 2023, and additional funding can result in the agency closing more audits. Former President Biden announced in 2021 that the agency planned to hire an additional 87,000 employees by 2031. The Trump Administration may put a dent in that number, but even then, audits have been declining.

The 582,944 audited tax returns are a decrease compared to the 2022 fiscal year. During that year, the IRS closed roughly 626,000 audits—even lower than the 738,959 audits closed in the fiscal year 2021.

Fiscal year	Number of closed audits
2021	738,959
2022	626,000
2023	582,944

The reduction of audits partially reflects a shift away from low-income households that are claiming the earned income tax credit. The agency is shifting its focus to high-net-worth individuals who earn more than $1 million per year. Corporations are another target for the IRS.

What is an IRS audit like?

You shouldn’t stress about an IRS audit. While it will involve gathering paperwork and can be an inconvenience, it’s best to approach an IRS audit as calmly as possible. 

IRS audits start with a letter in the mail in which the IRS informs you that your tax return has been selected for a formal audit. You will receive details about which items you need to verify and the type of documentation you must provide.

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Tip

❗It’s important to note that the IRS will never call you about an audit.

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The IRS sends out many audits each year, but not all are identical. Several types of IRS audits are:

1. Corresponding audit: You must send the IRS proof that certain transactions and expenses are legitimate. This will involve sending necessary documents based on the audit’s request. 
2. Office audit: You will need to visit an IRS office to clarify complex tax manners. Any unusual transactions and outliers may lead to an office audit.
3. Inventory audit: Businesses with significant inventory may receive an audit from the IRS to verify their records.

Common IRS audit triggers

Items IRS agents look for that can result in an audit include:

• You don’t report your taxes
• Higher expenses than usual
• You earn a high income
• Math errors (e.g., using round numbers for expenses)
• Large income jump
• Claiming many deductions and charitable contributions
• Foreign accounts
• Cryptocurrency transactions
• Business vehicle

You shouldn’t be afraid to use legitimate deductions and charitable donations to reduce your tax bill. Several of the items listed above are perfectly legal. However, you should avoid certain items on this list, including not reporting your taxes or making math errors.

How to reduce your chances of an IRS audit

The IRS audits hundreds of thousands of taxpayers each year, but several actions can reduce the likelihood of getting audited. These include:

• Keep good records and double-check your tax returns
• Sign your return
• File your tax returns correctly
• Make sure you file all necessary paperwork
• Use proper deductions
• Follow the home office rules
• Work with an accountant or use software
• File your tax returns on time

Following the basics is the key to avoiding an IRS tax audit. This checklist should keep you in good graces with the IRS and make each tax filing season a little smoother.

What to do if you get audited by the IRS in 4 steps

Taking quick action and understanding what the IRS wants can lead to a better experience when you receive an audit. If you ignore an IRS audit, the federal agency can start collecting the taxes you owe, and you will also waive your appeal rights within the IRS.

Most IRS audits are done within three to six months. However, some can last longer if you don’t provide information right away or the auditor wants to investigate other areas or years of tax returns.

Throughout the process, you have a right to prompt, courteous, and professional assistance when communicating with the IRS. The instructions must be clear, and you may speak with a supervisor about inadequate support. If you get audited by the IRS, take the following steps.

1. Prepare the requested documents

After receiving the IRS audit letter, you should prepare any of the requested documents. Correspondence audits may only require a few documents, but an office audit will be more thorough. 

2. Present the documents

You must mail documents to the IRS via a correspondence audit. However, you’ll need to visit the nearest IRS office for an office audit. More than 75% of IRS audits are conducted via mail, so it’s less likely you’ll need to make a trip to the office than to mail in documentation. 

3. Be on the lookout for a notification

The IRS will typically notify you within a few months about the audit’s status. It may include proposed adjustments for your tax return along with any applicable taxes owed, interest, and IRS audit penalties.

4. Challenge or accept the audit

Taxpayers can choose whether they want to challenge or accept the outcome of an IRS audit. You’ll need to meet with an IRS manager, sue the IRS, or request a formal appeals conference to challenge the results. 

If you agree with the audit, you’ll sign the IRS forms and, if necessary, set up a payment plan.

IRS audit myths and misconceptions

No one wants to go through an IRS audit, but you should be aware of these important myths and misconceptions you should know. That way, you’ll be in a better position in the event you get audited.

• Audits are random: The IRS uses a statistical formula to determine whether to audit someone. The federal agency doesn’t randomly choose people to be audited.
• You can’t negotiate with the IRS if you owe money: The IRS wants to get paid, and the agency may reason that it’s better to receive something than nothing. Consumers who have financial hardships may be able to negotiate lower tax debt.
• The IRS targets low-income families: Although the IRS audits some people who claim the earned income tax credit, a higher percentage of wealthy individuals are audited than low-income households. 
• Filing too many deductions increases the chances of getting audited: It’s normal for businesses to have many deductions. As long as you are running a profitable company, the IRs shouldn’t target business owners due to a high number of deductions.

Takeaways: Should you worry about an IRS audit?

The likelihood of being audited by the IRS is low. Keeping your documents organized is a good practice regardless of whether you get audited. Being prepared will make an audit more seamless, but you don’t need to do it alone.

Working with a tax professional can make an IRS audit easier to navigate. Tax professionals know how to navigate the tax code and increase the likelihood that your audit ends within a few months.

If you’re looking for help with an audit, consider consulting with Anthem Tax Services. The tax relief firm offers a 100% money-back guarantee if you don’t save money or have your debt reworked. Anthem Tax Services could be a great option if you owe $10,000 or more because it can help boost your tax savings.

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