Audits Explained: Why They Happen and When You Should Actually Worry

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.

How far back will the IRS go to audit a tax return?

According to the IRS website, the agency will generally only include tax returns dating back three years when auditing someone. However, if a big enough error is turned up, they will go back further, but "usually don't go back more than the last six years." That's why it's recommended that you hang on to tax returns from the last six years if you are concerned about being audited.

"The IRS tries to audit tax returns as soon as possible after they are filed," the agency's site says. "Accordingly, most audits will be of returns filed within the last two years."

Are there any biases in who gets audited?

Beyond trends dictated by income levels, studies have found what seems to be a notable racial disparity among Americans who are audited. A 2023 study from Stanford University found that Black taxpayers were at least three times more likely to be audited than non-Black ones, with those in certain income brackets or with certain filings statuses being as much as 4.7% more likely to be targeted.

For more, find out if your state lowered its income tax rate recently.