The reality is that most IRS audits are mail inquiries related to issues that the IRS sees as obvious errors, such as not qualifying for the earned income tax credit. In fact, more than 7 out of 10 audits are mail audits. Likely mail audit targets are those taxpayers who make obvious errors on their return. In mail audits, the IRS has a 90% change rate meaning many taxpayers owe additional tax as a result of the IRS audit selection process. These audits are usually not very intrusive and can be handled in a one-time response to the IRS.
What taxpayers generally fear most is the IRS office or field audit. These audits are much more than a review of line items on the tax return. In these audits, the IRS may also be looking for what is NOT on the return. These comprehensive audits form many of the nightmare stories taxpayers have about interacting with the IRS. They are also the source of most of the IRS’s criminal prosecution cases.
Face-to-face audits: the “real” IRS audit
When it comes to IRS audits that people fear most (face-to-face audits), taxpayers can be selected for several reasons. A Treasury Inspector General for Tax Administration (TIGTA) audit report illustrated the 10 common audit selection areas employed by the IRS to decide what individual taxpayers will be audited. These 10 examination areas show IRS audit priorities.
Here are the 10 priority areas with a brief explanation of who they are targeting: