Most taxpayers go through their entire careers without ever being audited. So when the IRS does pick a return, the natural first question is: why mine? The honest answer is that it’s usually some combination of an algorithm, a third-party document, and a numerical mismatch — not a vendetta. Below are the most common reasons the IRS pulls a tax return for audit.
1. DIF and UIDIF scores
Every individual return is run through the IRS’s Discriminant Inventory Function (DIF) and Unreported Income DIF (UIDIF) scoring systems. These compare your return against statistical norms for taxpayers in similar income brackets. A return with deductions or losses that fall well outside those norms gets a higher score — and a higher chance of being flagged for examination.
2. Information-return mismatches
This is the single most common audit trigger. When a payer issues a W-2, 1099, K-1, or 1098 to you and the IRS, the IRS’s matching system compares those documents against what you reported. If the amounts don’t line up, the system generates a notice — most often a CP2000. Technically a CP2000 is an “automated underreporter” notice rather than a traditional audit, but the IRS treats it as an examination of that issue.
Related reading: IRS Notice CP2000: What It Means and How to Respond.
3. Cash-heavy or self-employed returns
Schedule C filers, especially in cash-intensive industries (restaurants, salons, construction, retail), face audit rates several times higher than W-2 employees. The IRS knows cash income is easier to underreport, so it scrutinizes these returns more aggressively — particularly when expenses look inflated relative to gross receipts.
4. Large or unusual deductions
Large charitable contributions, home-office deductions, vehicle expenses claiming 100% business use, and Schedule A miscellaneous deductions all draw attention if they’re outsized relative to income. None of these are wrong to claim if legitimate — but they raise the audit score.
5. Refundable credits
The Earned Income Tax Credit, the Premium Tax Credit, and (more recently) the Employee Retention Credit have all been areas of heavy IRS enforcement. ERC in particular has its own dedicated examination program, and the IRS has signaled it intends to audit large numbers of ERC claims.
6. Foreign accounts and assets
FBARs (FinCEN 114), Form 8938, Form 5471, and similar international information returns are high-priority items. A missing or incomplete foreign-asset disclosure can trigger an audit on its own, and the penalties for non-filing are severe.
7. High income
Audit rates rise sharply at higher income levels. Returns reporting more than $1 million in income are audited at roughly 10–20 times the rate of average returns. The IRS has publicly committed to increasing examinations of taxpayers earning over $400,000.
8. Partnership and S-corp pass-throughs
Under the Bipartisan Budget Act (BBA) partnership audit rules, the IRS now has a streamlined process to audit large partnerships. Funded by the Inflation Reduction Act, the IRS has stood up dedicated teams targeting large pass-through entities.
9. Tip-offs, whistleblowers, and related-case audits
The IRS pays cash rewards to whistleblowers under IRC § 7623. Audits also propagate — if a business partner, related entity, or shareholder gets audited, the IRS often opens parallel exams on related returns.
10. Random selection
A small percentage of audits — particularly under the National Research Program — are entirely random. The IRS uses these to calibrate its DIF scoring models. If you draw one of these, there’s nothing you did to “cause” it. It’s purely statistical.
What to do if you’ve been picked
The trigger matters less than the response. The first step is reading the notice carefully to identify what’s being examined and what type of audit it is. From there, the playbook is the same: respond on time, organize your documents, and don’t volunteer information beyond what’s requested.
For a full walkthrough, see What Happens During an IRS Audit and How to Respond to an IRS Audit Letter.
Related Reading
Want the full playbook?
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