Legacy Law Blog

Few words strike more fear into taxpayers than “IRS audit.”

Pop culture and anecdotal stories have created an aura of dread around audits, fueling a host of myths and misconceptions.

In reality, most IRS audits are routine, not punitive, and the risk is far lower than many believe. This post will debunk the most persistent IRS audit myths and provide a clear-eyed look at what really triggers an audit and what you can expect if you happen to be selected.

Myth 1: An Audit Means you did Something Wrong

One of the most common misconceptions is that being audited is a sign of guilt or wrongdoing. In truth, the IRS audits tax returns for many reasons, including random selection, mathematical errors or discrepancies between your return and information reported by third parties (like employers or banks). Many audits are simply the IRS verifying information, not accusing you of tax evasion. Millions of taxpayers are audited each year, and most have done nothing wrong. Many audits end quickly and with no adjustments or increases in taxes owed.

Myth 2: Only the Wealthy get Audited

While high-income earners and large businesses do face increased scrutiny, audits are not limited to the wealthy. The IRS uses sophisticated data analysis and computer algorithms to flag returns with errors or inconsistencies, regardless of income level. In fact, the IRS has increased audits of low- and middle-income taxpayers in recent years, especially those claiming credits like the Earned Income Tax Credit, which is often prone to errors. No one is immune based purely on income.

Myth 3: Audits are Always In-Person and Intimidating

Images of IRS agents knocking on doors are largely a myth. Most audits are “correspondence audits,” conducted entirely by mail or more commonly by email. In these cases, the IRS sends a letter requesting clarification or documentation for specific items on your return. Often, responding with the requested information resolves the issue without ever meeting an IRS agent. In-person audits, where you meet with an IRS representative, are much less common and usually reserved for more complex cases.

Myth 4: Filing Electronically or Amending Your Return Increases Audit Risk

Some fear that e-filing or filing an amended return makes them a target. In reality, electronic filing often reduces audit risk because tax software catches many common errors before submission. Amended returns are reviewed the same as any other tax return. The main audit triggers remain discrepancies, unreported income or unusually high deductions, not the mere act of amending or e-filing.

Myth 5: Claiming Deductions or Credits Will get you Audited

Many taxpayers skip legitimate deductions or credits out of fear they’ll trigger an audit. The IRS expects you to claim all deductions and credits you’re entitled to. What raises red flags are claims that are disproportionate to your income or are unsupported by documentation such as unusually large charitable contributions or home office deductions that don’t fit your work profile. If your claims are reasonable and well-documented, you should not avoid them out of audit fear.

Myth 6: Audits are Done Immediately After Filing

Audits are not instant. The IRS generally has three years from your filing date to audit your return, and most audits occur in the latter half of that period. For substantial errors, the IRS can go back up to six years. It’s wise to keep your tax records for at least that long, just in case.

Myth 7: You Can’t Challenge an Audit Outcome

Some believe that once the IRS issues an audit determination, it’s final. In fact, you have the right to appeal audit findings if you disagree. The IRS provides a formal appeals process, and you can present additional information or arguments to support your position. Many taxpayers successfully resolve disputes at this stage.

Myth 8: Audits are Random

While some audits are random, most are triggered by specific factors. The IRS uses the Discriminant Information Function (DIF), a computerized system that scores returns based on how much they deviate from statistical norms for similar taxpayers. Returns with high DIF scores-often due to mismatches, large deductions or complex transactions are more likely to be audited. Related returns, such as those connected to a business partner under audit, can also be selected.

Myth 9: You Should Only Seek Assistance from a Tax Practitioner if the Auditor Signals That an Adjustment Might be Necessary

Many individuals and businesses attempt to operate in good faith with IRS auditors who request information as part of an audit. This can be a mistake. An auditor can expand their audit to include additional tax years or tax forms if they uncover additional information in the responses they receive from the taxpayer. Often this can lead to additional adjustments and increases in tax that could have been avoided had the taxpayer sought representation at the beginning of the audit.

An experienced tax practitioner can help you navigate the audit process and ensure that the scope remains focused on the original subject of the audit, heading off any inappropriate requests for information that exceed the scope. In the case of a tax practitioner, an ounce of prevention is worth a pound of cure when it comes to an audit.

The Bottom Line: Don’t Let Myths Dictate Your Tax Strategy

IRS audits are far less common and intimidating than their reputation suggests. Only about 1% of taxpayers are audited in any given year. Most audits are resolved quickly and painlessly, especially if you maintain accurate records and respond promptly to IRS requests.

Don’t let fear of an audit prevent you from claiming deductions or credits you deserve. If you do receive an audit notice, remember, it’s not an accusation, and you have rights, including the right to appeal.

The best defense is honest, thorough tax preparation, good recordkeeping and representation by an experienced tax practitioner. If you’re unsure or concerned, consult a qualified tax professional who can guide you through the process and help separate fact from fiction.