If you are also a taxpayer, then you must be wondering about your chances of being audited by the IRS. While the audit rate has been declining in recent years, it is still very important for taxpayers to understand the factors that can increase the chances of audit risk and what the different steps are that can help in reducing the chances of IRS audit risk.
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What Are the Chances of Being Audited by the IRS?
As a US expat, your chances of being audited by the IRS are extremely low, under 0.5% for most of the income levels. Americans who are living abroad can face higher inspection due to the complex filing constraints.
The real audit risk mainly depends on how you have filed compared to where you live. With the appropriate reporting and the right tax protection, most people owe $0 in US taxes in the year 2025 and face the nominal audit risk.
As per the latest IRS compliance data, “Only 0.2% of the individual tax returns are audited and the IRS has committed to not increasing the audit rates for taxpayers earning under $400,000.”
If your income is under $400,000 and you have filed correctly, then you probably do not owe anything.
The IRS department is prioritizing the audits in the following areas:
- High income earners ($400k+): According to the IRS, taxpayers who are earning over $400,000 annual basis will face the high audit rates compared to the past years.
- Cryptocurrency Transaction: The digital assets, such as Ethereum, Bitcoin, and stablecoins, are now being tracked closely by the IRS. The IRS has expanded its enforcement efforts to make sure that the expats who are reporting the transaction or income in crypto are fully compliant.
- Unreported offshore income & foreign accounts: People with foreign bank accounts, business interests, or investments are seeing the higher IRS oversight, especially under the FBAR and FATCA regulations.
“IRS audits are increasingly focused on high-income expats and those with crypto holdings,” says Read Kopald, CPA.
Also Read
Form W-4 Guide: How to Fill Out Your W-4 for the Right Tax Withholding
To stay compliant, it is important for taxpayers to ensure that they have accurate reporting for all foreign income and digital asset transactions while keeping the records to demonstrate claims on their tax returns.
What Are the Chances of Being Audited by the IRS: Overview
| Article on | What Are the Chances of Being Audited by the IRS? Facts and Statistics |
| Country | USA |
| Department | Internal Revenue Service |
| Recipient | Taxpayers |
| Official site | irs.gov |
Audit rate trends
As per the IRS Strategic Operating plan, “the agency plans to increase audit rates for high-income individuals and large corporations by 2026.”
The audit rate for people with income of over $10 million is expected to be increased from 11% in 2019 to 16.5% by 2026. For the large organization with assets over $250 million, the audit rates are projected to be raised from 8.8% in 2019 to 22.6% by the year 2026.
While the overall audit rates have been declining, the IRS is focusing on its enforcement efforts on the higher-income taxpayers and the large establishments. The IRS department is committed to not increasing the audit rates for small businesses and individuals with an income of less than $400,000 annually. These trends indicate the strategic shift in the IRS enforcement priorities and highlight the increased scrutiny on the large entities and higher-income individuals.
Why Expats Face Slightly Different Risks?
Living abroad does not increase the chances of your audit risk automatically, but there are certain expatriate situations that attract the attention of the IRS.
| Complex Filing Requirements | The Expat return includes multiple calculations. The IRS department uses automated systems to determine the inconsistencies that make the accuracy crucial. |
| Foreign income reporting gaps | The missing foreign account disclosure or the incomplete income reporting disclosures raise a red flag. |
| Expat Tax benefit claims | The foreign tax credit and foreign earned income exclusion receive additional scrutiny, but these are the legitimate tools that are designed specifically for expats. |
Actionable steps to avoid an IRS audit
- Record-Keeping best practices: The IRS department requires taxpayers to keep the records for at least three years, but in most cases of substantial underreporting, the audits can go back six years or more.
- Correcting the mistakes before IRS notices: If you have identified any errors on your tax return, then you should try to fix them proactively, as it can help in avoiding the chances of audits and penalties.
You can consider the following steps to correct your tax return mistake
- You should file an Amended Return (Form 1040-X) to correct any discrepancies.
- You should report any unreported foreign accounts through the streamlined compliance procedures.
- If you have missed reporting the foreign income or crypto income, then you should amend the return before the IRS investigation.
FAQs
Do expats get audited more often compared to US residents?
No, it is not necessary, but expats face the exclusive IRS inspection due to the foreign income reporting requirements.
Can working remotely from abroad trigger an IRS audit?
Yes, especially if you are claiming the foreign tax credit or Foreign Earned Income Exclusion.
Can moving between the countries frequently increase my risk of an IRS audit?
Yes, especially if your tax situation has become complex due to frequent relocations.
How to avoid an IRS audit?
By filling out an accurate tax return, you can easily avoid the chances of an IRS audit.