A letter from the IRS can stop you in your tracks. Especially when it says your tax return has been selected for audit. For most people, the word “audit” brings up images of lost money, endless paperwork, and the fear of being accused of something they didn’t do. But the truth is, not every audit ends in disaster, and not every audit means you’ve done something wrong.
I’m Venar Ayar. I’ve spent my career helping people face down the IRS and emerge on the other side with their finances, businesses, and peace of mind intact. If you’ve been selected for an audit—or just want to understand how to avoid one—this guide will walk you through what IRS audits are, why they happen, who’s most at risk, and how to prepare.
An IRS audit is a formal examination of your tax returns and financial records. The goal is to determine whether you accurately reported your income, deductions, and credits, and whether you paid the correct amount of tax. The IRS conducts audits to enforce tax compliance and to deter underreporting or fraud.
A variety of factors can trigger audits, but they all start with one thing: your tax return. Every year, the IRS processes millions of returns. Most are accepted without issue. But some are flagged for closer review.
The IRS conducts several types of audits, depending on the complexity of the return and the nature of the issue:
Each type of audit is serious, but the level of scrutiny increases with each step. Regardless of the type, the IRS will always send a written notice explaining what they’re reviewing and what documents they want to see.
The IRS doesn’t audit randomly. Most audits are triggered by red flags in your tax return or by the agency’s automated scoring system, known as the Discriminant Function System (DIF). This system assigns a score to each return based on how likely it is to contain errors or omissions. A high score increases the chance of an audit.
Here are some of the most common triggers:
While anyone can be audited, certain taxpayers are more likely to be selected for an audit. IRS audit rates vary depending on income level, filing status, and the complexity of the return.
Taxpayers with total positive income exceeding $200,000 are more likely to face a higher rate of audits. The IRS believes there’s more potential for underreported income or aggressive deductions in these returns. If your income exceeds $1 million, your audit risk increases even more.
Without third-party reporting (like W-2s), self-employed taxpayers are more likely to underreport income or overstate expenses. The IRS knows this and pays close attention to small business returns, especially those that report losses year after year.
Returns that include multiple income streams, foreign bank accounts, rental properties, or large itemized deductions often draw extra scrutiny. Even inconsistently claiming dependents can raise a red flag.
If your return results in a large tax refund, especially one that seems out of proportion to your income and taxes withheld, the IRS may want to verify the numbers.
If you’ve received an audit notice, don’t panic—but don’t ignore it either. How you respond can make all the difference.
Begin by gathering all the records that support the items listed on your tax return. This may include:
The IRS will specify what they want to see. Provide only what’s requested. Sending extra documents can open the door to more questions.
IRS notices include deadlines. Missing one can escalate the situation or lead to penalties. If you need more time, you can request an extension—but don’t wait until the last minute.
You have the right to:
These rights are part of the Taxpayer Bill of Rights, and they apply to every audit, no matter how small.
Some audits are straightforward. Others are anything but. If your audit is complex, involves large sums of money, or you’re unsure how to respond, it’s time to get help.
A certified public accountant, enrolled agent, or tax attorney can speak directly with the IRS on your behalf. They know how audits work, what the IRS is looking for, and how to negotiate the best possible outcome.
At Ayar Law, we’ve handled thousands of tax audits—from simple correspondence audits to complex field audits involving multiple tax years. We know how to protect your rights, limit your exposure, and resolve the audit as quickly and favorably as possible.
You can’t guarantee you’ll never be audited, but you can reduce the odds. Here’s how.
Double-check your math. Make sure all income is reported, including side gigs, freelance work, and investment earnings. If you receive a 1099, the IRS does too.
Only claim deductions and credits you can fully support with documentation. The IRS pays close attention to:
Make sure you have documentation to support these deductions and credits.
Maintain detailed and organized financial records for at least seven years. This includes:
Good records are your best defense in an audit.
Tax laws change frequently. Staying up to date helps you stay compliant and avoid mistakes that could trigger an audit. For example, recent changes under the Inflation Reduction Act have increased funding for IRS enforcement, which may lead to higher audit rates in the coming years.
An IRS audit can disrupt your life, your business, and your finances. But it doesn’t have to. With the right preparation and the right help, you can get through it—and even come out stronger on the other side.
If you’ve received an audit notice, don’t wait. The sooner you act, the more control you have over the outcome. And if you haven’t been audited but want to protect yourself, now is the time to get your records in order and your questions answered.
Request a free case evaluation today. At Ayar Law, we specialize in defending taxpayers against IRS audits and helping them regain control over their financial affairs. Whether you’re facing a correspondence audit or a full-blown field audit, we’re here to protect your rights and your future.
Contact us now or call (248) 262-3400.
