Probability of IRS Audit for Income Over $1 Million
1.1%
Annual probability in US
Taxpayers earning over $1 million face an IRS audit rate of about 1.1%, roughly 3 times the overall audit rate.
High-income taxpayers face significantly higher IRS audit rates than average filers. For those reporting income over $1 million, the audit rate was approximately 1.1% in fiscal year 2022, compared to the overall rate of 0.38%. With increased IRS funding from the Inflation Reduction Act, audit rates for high-income filers are expected to increase significantly in coming years.
The IRS has stated its intention to use new funding to increase audit rates on taxpayers earning over $400,000 while not increasing audit rates for those earning under $400,000. Historically, the gap was even larger: in 2011, the audit rate for returns reporting $1 million or more was 12.5%, before declining due to budget cuts and staffing reductions.
High-income audit triggers include large charitable deductions relative to income, complex partnership or S-corporation arrangements, offshore accounts, cryptocurrency transactions, passive activity losses, and significant cash businesses. Having a CPA prepare your return, maintaining thorough documentation, and filing accurate returns remain the best strategies. If audited, professional representation (CPA, enrolled agent, or tax attorney) is strongly recommended.
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