As the tax filing deadline approaches, the Internal Revenue Service (IRS) has announced a significant increase in audits in 2025. This initiative seeks to detect inconsistencies in tax returns and improve compliance as part of a larger strategy to combat fraud and increase federal revenue collection.
With the IRS using artificial intelligence and data analysis to detect irregularities, taxpayers must be more vigilant than ever. Certain individuals and businesses are more likely to be audited, so it’s critical to understand who is being investigated and how to prepare to avoid legal trouble or financial penalties.
Who Is More Likely to Be Audited by the IRS in 2025?
The IRS prioritizes audits in industries that have a high risk of tax evasion or documentation errors. According to tax attorney Michael Steffany, the following categories of taxpayers face the greatest audit risk:
- Individuals earning more than $10 million per year.
- Tax returns with discrepancies between reported income and official tax records.
- Businesses with complex tax structures or international operations.
- Recipients of the Earned Income Tax Credit (EITC), due to a high error rate in documentation.
Being selected for an audit does not necessarily imply wrongdoing. Some cases are selected at random, while others stem from financial ties to previously audited individuals or businesses.
Key Risk Factors and IRS Document Requests
To identify irregularities, the IRS scans millions of tax returns using advanced algorithms and AI-driven models. Several red flags raise the possibility of an audit, including:
- Inconsistencies between reported income and official tax records.
- Unusual deductions or excessive expenses in specific categories.
- Duplicate dependent claims on separate tax returns.
- Financial connections to individuals or companies previously audited.
If selected for an audit, taxpayers receive an official IRS notice specifying the required documents, which may include:
- Income records: W-2 forms, 1099s, and other earnings statements.
- Deduction and expense support: Receipts, invoices, and bank statements.
- Investment and real estate records: Brokerage statements and financial reports.
- Loan and property documentation: Contracts and relevant financial disclosures.
How to Reduce Your Chances of an IRS Audit
To minimize audit risk and avoid penalties, tax experts recommend the following:
- Accurately report income to match official tax documentation.
- Avoid inflating deductions—claim only legitimate, well-documented expenses.
- Keep organized records of income, expenses, and deductions for at least three years.
- Respond promptly to IRS notifications within the required 30-day window to prevent additional penalties.
With increased IRS scrutiny in 2025, ensuring tax return accuracy becomes more important than ever. As the agency increases its use of AI to detect fraud, taxpayers should prioritize compliance, transparency, and meticulous record-keeping to avoid costly investigations and financial penalties.
