When it comes to taxes, many filers worry that even small mistakes will get them in trouble with the IRS. The fear of an audit can lead taxpayers to obsess over minor details and avoid taking perfectly legitimate deductions. So does the IRS really catch every single error on a tax return?
Quick Answer
No, the IRS does not catch every mistake on tax returns. Their limited resources prevent them from auditing more than a small percentage of returns each year. However, certain types of errors increase your chances of getting audited. Understanding the most common triggers for an audit can help you file an accurate return and avoid issues.
What are the Most Common Tax Return Errors?
According to the IRS, the most common errors made by taxpayers include:
- Incorrect or missing Social Security numbers
- Misreported income
- Incorrect deductions or credits claimed
- Math errors like calculation mistakes
- Forms not signed or dated
These types of mistakes often occur when filers are in a rush or rely on outdated information. Simple data entry issues like transposed numbers can also lead to problems if not caught.
What Triggers an IRS Audit?
The IRS uses computer programs to flag returns with suspicious activity. Certain types of errors and discrepancies raise red flags. Some of the top audit triggers include:
- Large, unusual deductions or business losses
- Business income not reported on Form 1099
- High expenses compared to income
- Math errors that significantly change the tax amount
- Omitted income reported to the IRS by employers or banks
The more income you report and the more complex your return, the more likely misstatements will draw scrutiny. The IRS also targets certain professions like small business owners for audits more often.
How Many Audits Does the IRS Conduct?
Due to limited examination resources, the IRS only audits a small fraction of returns each year. For fiscal year 2022, only around 0.45% of individual tax returns were audited. The audit rate was just 0.05% for returns reporting under $25,000 in income. Higher earners had higher audit chances, but even those making over $10 million were only audited at about 6.66%.
Individual Audit Rates for FY 2022
| Income Range | Audit Rate |
|---|---|
| Under $25,000 | 0.05% |
| $25,000-$200,000 | 0.15% |
| Over $200,000 | 1.93% |
| Over $1 million | 3.55% |
| Over $5 million | 5.34% |
| Over $10 million | 6.66% |
As these low audit rates show, the IRS simply does not have the capacity to thoroughly scrutinize every single return filed. Many errors slip through the cracks.
When is it Safe to Fix a Mistake?
If you discover an error after filing your taxes, you may be able to correct it without penalty. Depending on the type of mistake, you have a few options:
- Amended Return – You can file an amended or corrected Form 1040-X return to fix errors like unreported income, incorrect deductions, missed credits, etc. Amended returns must be filed within 3 years of the original filing date.
- Claim Refunds – If you forgot to claim a deduction or credit you qualified for, you can file an amended return to get a refund within 3 years of original filing.
- Request an Abatement – If the IRS catches a math error or mistake in your original return, you can request an abatement within 60 days to reverse any penalties or interest charged. The tax amount itself must still be paid.
For small mistakes, it is often easier to just claim the correct amount next year instead of amending. Butsignificant errors should be fixed with an amended return before the IRS notices them first.
When is it Too Late to Fix a Mistake?
If the IRS catches you before you correct your own errors, your options become much more limited. At that point:
- You will have to pay any additional tax the IRS says you owe.
- Penalties like the 20% substantial understatement penalty may apply.
- You can challenge the IRS’s findings, but the burden of proof will be on you.
- Criminal prosecution for tax evasion is possible for intentional cheating.
Once the IRS flags your mistake, you lose the chance to fix errors on your terms. Audits are disruptive, stressful, and expensive to dispute. That’s why self-correcting errors through an amended return is usually your best option.
When Can the IRS Go Back to Audit Prior Year Returns?
Normally, the IRS can only go back 3 years to audit returns and assess additional tax. But this extends to 6 years if substantial income was underreported (25% or more of gross income omitted). They can go back indefinitely if fraud is suspected. There is no time limit if a return was never filed at all.
Given these long lookback windows, amending past returns or claiming missed credits before the IRS gets to them is advisable. Letting errors fester for years creates massive exposure if you end up under audit.
Should You Hire a Pro to File Your Taxes?
The best way to avoid tax mistakes getting you into hot water is to hire a tax professional to prepare your return. An experienced CPA, EA, or attorney intimately understands complex tax codes and stays up-to-date on the latest changes and IRS guidance.
Pros can help you:
- Maximize deductions you qualify for but may have overlooked.
- Avoid incorrect claims that could trigger an audit.
- Catch errors before filing so amended returns aren’t needed.
- Comply with reporting requirements for investment, business, foreign income, etc.
- Decide if a penalty-abatement request makes sense for any errors.
- Defend your return if audited and negotiate with the IRS on your behalf.
For a few hundred dollars, a pro can provide the tax expertise and audit defense that saves you frustration, time, and money. Have confidence that your return reduces IRS red flags, audit risk, and mistakes to a minimum.
Conclusion
The IRS simply does not have the capability to catch every error and audit every federal income tax return filed each year. However, certain types of tax mistakes significantly increase your chances of IRS scrutiny. Intentional evasion like omitting income can even lead to criminal charges.
To avoid issues, thoroughly double check your return each year and correct any mistakes as soon as possible through an amended filing. Pay particular attention to common trouble spots like unreported business or investment income. If your tax situation is complex, partnering with a tax pro provides defense and assurance in case of an audit. Catching errors before the IRS does gives you control to fix problems on your own terms.
