WHAT ARE MY CHANCES OF BEING AUDITED BY THE IRS?
According to The Kiplinger Tax Letter and the Internal Revenue Service’s website, the average American has a very small chance of being audited by the IRS in calendar year 2026. In addition, the number is expected to become more favorable to taxpayers in the coming years. Over 20% of the IRS workforce has retired, been furloughed, or been let go since January of 2025. Many of those former IRS employees were the more experienced agents and managers, and the loss of those experienced personnel may affect the IRS’s institutional knowledge and ability to efficiently conduct examinations. Funding for the IRS has also been cut by $11.2 billion dollars for fiscal year 2026. Further, the budget for the IRS enforcement unit has been cut by 18%.
The lack of agents does not mean that now is a good time to try to take aggressive or unsupported tax positions. The IRS admits that there will be fewer audits in the coming years, but the audits that do happen will be much more targeted. The IRS is increasingly using artificial intelligence, advanced analytics, and data matching to identify highrisk returns and potential noncompliance, which allows the IRS to improve its ability to expose suspicious activities on tax returns. Current areas receiving significant IRS compliance attention are refundable credits (like the American Opportunity Credit), income matching discrepancies, conservation easements, and foreign tax credits.
Recall that for most IRS audits, the IRS generally has three years from when the tax return was due or filed to audit the return. However, there are exceptions, and in some cases the IRS has six years to request an audit. There are also a number of issues that can increase the likelihood of IRS scrutiny, including:
1. Large Charitable Donations
2. Gambling Losses
3. Unreported Income
4. Rental Income and Deductions
5 Home Office Deductions
6. Casualty Losses
7. Business Vehicle Expenses
8. Cryptocurrency Transactions
9. Day Trading Activities
10. Foreign Bank Accounts
Friendly reminder, states can also audit for state tax issues as well. New York, New Jersey, Pennsylvania, Massachusetts, Connecticut, and many other states are known to audit state income tax issues, especially for snowbird residents. The State of Florida routinely audits businesses for sales and use tax issues, along with unemployment tax issues. Additionally, Florida has been known to audit charitable organizations for misuse of its sales tax exemption certificates.
If you find yourself being audited by the IRS, or if you are a charitable organization facing an audit from the Florida Department of Revenue, consider calling Revis, Hervas & Goldberg to assist you in the process.
