Who is most likely to be audited?

Who is most likely to be audited includes groups whose returns are more complex or have higher risk of underreporting. Historically, high income taxpayers, particularly those earning over $500,000 and especially over $10 million, have higher audit rates because larger amounts are at stake and returns involve investments, partnerships, and deductions that require verification. Self-employed individuals filing Schedule C are more likely to be audited than W-2 employees because business income and expenses rely on self-reporting and have more opportunity for error or exaggeration, especially those with large expenses relative to revenue or who report consistent losses. Cash intensive businesses like restaurants, bars, salons, and construction contractors are more likely to be audited due to potential for unreported cash income. Taxpayers claiming Earned Income Tax Credit have faced higher audit rates due to complexity and improper payment rates. Individuals with large charitable contributions, home office deductions, rental losses, or offshore accounts also face higher scrutiny. Additionally, taxpayers whose deductions appear disproportionate to income compared to similar taxpayers are flagged by IRS computer scoring systems, and random selection also occurs for compliance studies.