What Income Level Triggers an Audit?

For many taxpayers, one of the biggest concerns during tax season is the possibility of an IRS audit. While the IRS does not publish exact formulas for selecting returns, certain income levels statistically have higher audit rates. Understanding how income affects your chances of being audited can help you file more confidently and avoid unnecessary red flags.

Does Income Level Affect Audit Risk?

Yes. While anyone can be audited, IRS data consistently shows that audit rates increase as income rises. Taxpayers with very low income and those with very high income tend to face the most scrutiny.

Here’s a breakdown of how income influences audit risk.

Audits for Low-Income Taxpayers

Taxpayers earning under $25,000, particularly those claiming the Earned Income Tax Credit (EITC), are audited at higher rates than middle-income earners. This is because:

• EITC rules are complex
• Errors are common
• Fraud has historically been associated with EITC claims

Even though these taxpayers have low income, the IRS focuses on verifying eligibility for credits, dependents, and filing status.

Middle-Income Earners See the Fewest Audits

Taxpayers earning between $50,000 and $500,000 typically experience the lowest audit rates. This group includes most W-2 employees, families, and small business owners.

Still, certain factors can increase audit risk at any income level, such as:

• Large charitable deductions
• High Schedule C (self-employment) expenses
• Rental real estate losses
• Missing or mismatched 1099s
• Crypto transactions
• Foreign accounts or assets

In most cases, however, middle-income taxpayers face only minimal audit exposure.

High-Income Taxpayers Face the Highest Audit Risk

Once income crosses $500,000, audit rates begin to rise. The IRS pays particular attention to:

• Investors with large capital gains
• High-income self-employed individuals
• Business owners
• Taxpayers with complex deductions
• Those earning over $1 million per year

Million-dollar earners are audited at significantly higher rates than average taxpayers because their returns are more complex and more likely to include business income, pass-through entities, and significant deductions.

What Really Triggers an Audit?

While income is a factor, the IRS is more interested in discrepancies, unusual patterns, and potential underreporting, such as:

• Reporting much higher deductions than others in your income bracket
• Not reporting income that appears on W-2s or 1099s
• Claiming business losses year after year
• Inconsistent or incomplete information

Even high earners with clean and accurate returns may never be audited.

Concerned that your income or deductions might attract IRS attention? Dimov Audit can evaluate your risk profile and help you file clean returns. Reach out to us today for expert assistance.