IRS audits are back: what triggers scrutiny in 2026
Get ready to meet the IRS again, especially if you’re a high-income filer or a small business owner.
In 2026, audits are making a comeback, and this time, the IRS is focusing on specific groups like never before. According to the IRS 2024 Data Book, which covers 2022 tax returns, individual audit rates remain relatively low, around 0.4%. High-income earners are in a different league.
Taxpayers earning over $500,000 annually face audit rates 6 to 20 times the average. If you earn between $500K and $1M, your audit rate jumps to 0.6%. But if your income exceeds $10M? The IRS is paying even more attention, with audit rates reaching up to 2.9%.
The IRS is honing in on high earners, small businesses, and anyone whose tax return raises a red flag. So, is your tax return in the clear, or are you on the radar? Letโs take a closer look at whatโs getting flagged.
Big, unusual income jumps
So, you made $80,000 last year and $400,000 this year? Donโt be surprised if the IRS takes a closer look. Large income spikes, especially those with no clear explanation, such as stock sales or inheritances, are a huge red flag. If you canโt explain the jump, expect to get flagged by the IRSโs sophisticated data tools.
Mismatched W-2s, 1099s, and basic errors
A simple mistake on your W-2 or 1099 could lead to an audit in 2026. If the numbers on your return donโt match what the IRS has on file, youโre in trouble. The IRS is ramping up audits for these mismatches because theyโre easy to spot and donโt require much manpower.
According to the IRS Data Book for FY 2024, the agency closed 505,514 audits, generating $29 billion in recommended additional tax assessments.
Aggressive, large, or poorly documented deductions
If your deductions are too aggressive or poorly documented, donโt be shocked if the IRS starts asking questions. Whether it’s significant charitable contributions, home office claims, or deductions that donโt align with industry norms, anything that stands out will raise red flags.
For high-income filers, audit rates increase when there are substantial write-offs, especially those that seem out of line with their profession or income.
High-risk credits like the EITC
Claiming credits such as the Earned Income Tax Credit may trigger an audit, even as the IRS shifts its focus to higher earners. According to a November 2023 report on Congress.gov, the audit rate for Earned Income Tax Credit claimants was 0.78%, roughly 2.7 timesย the 0.29% rate for all domestic taxpayers.
Despite the IRS focusing more on higher incomes, those claiming refundable credits arenโt off the hook just yet.
Crypto, foreign accounts, and cross-border activity
If youโve been involved in cryptocurrency or have foreign accounts, the IRS is watching you more closely than ever. The agency has ramped up its enforcement around digital assets and offshore accounts, including foreign bank accounts and foreign trusts. IRS will continue to increase audits of crypto transactions and non-disclosed foreign accounts, so donโt expect this trend to die down soon.
Self-employed and cash-heavy small businesses
Self-employed folks and small businesses that deal in cash are prime targets for audits in 2026. If you report large deductions or consistent business losses on your Schedule C, get ready for a closer inspection.
According to JD Supra, the IRS significantly increased its audit focus on individuals and partnerships earning over $400,000 in FY2024, with planned examinations nearly 2.5 times the previous average. If your income fluctuates or your deductions seem too big for your earnings, prepare for a follow-up from the IRS.
Connections to other audits and suspicious preparers
Having your name connected to someone else under audit is an easy way to find yourself on the IRSโs radar. If your tax preparer is under investigation, or if you share dependents, businesses, or financial accounts with someone already flagged, you can expect to be pulled into a broader audit.
The IRS is using data systems to track patterns and is investigating suspicious preparers with high refund claims. So, if you’re working with a questionable preparer, you might just get caught in their web.
Complex partnerships, pass-throughs, and high-wealth taxpayers
One of the most significant shifts in the IRS audit strategy is the ramp-up in audits of complex partnerships and high-wealth individuals. CNBC reports that the IRS is leveraging artificial intelligence, machine learning, and advanced data analytics to identify high-end noncompliance, with a specific focus on taxpayers earning over $400,000, large corporations, and complex partnerships.
In 2024, IRS audits of these high-wealth taxpayers increased significantly as part of the agencyโs goal to focus on large partnerships and corporations, which expect a lot more scrutiny if youโre in this group.
Key takeaway
In 2026, the IRS is shifting its focus toward high-income individuals, small businesses, and anyone with messy returns. Large income jumps, mismatched documents, and aggressive deductions are all triggers for scrutiny. Whether youโre self-employed, claiming big credits, or involved in crypto, the chances of an audit are on the rise, especially if youโre linked to a high-net-worth or complex financial setup. Stay sharp and make sure your paperwork is airtight!
In 2026, the IRS is shifting its focus toward high-income individuals, small businesses, and anyone with messy returns. Large income jumps, mismatched documents, and aggressive deductions are all triggers for scrutiny.
While many are worried about the “tax man,” savvy taxpayers are unlocking hidden IRS deductions to stay protected and efficient. Whether youโre self-employed, claiming big credits, or involved in crypto, the chances of an audit are on the rise, especially if youโre linked to a high-net-worth or complex financial setup. Stay sharp and make sure your paperwork is airtight!
Disclosure line:
This article was developed with the assistance of AI and was subsequently reviewed, revised, and approved by our editorial team.
Like our content? Be sure to follow us
