When people say they’ve been “audited,” they usually mean they received a letter from the IRS. But not every IRS letter signals an audit. It helps to understand how returns are selected — and how issues are handled once they’re identified.

Audit rates are typically very low. According to the 2024 IRS Data Book, the IRS closed roughly 500,000 audits across all return types while processing well over 150 million individual returns and other filings. In other words, well under 1% (about 1/3 of 1%) of individual returns are audited, and most taxpayers will never experience a formal examination.

That seems low, but it’s higher than some other well-known fears. In the U.S., your lifetime odds of being struck by lightning are about 1 in 15,300 (0.0065%), while the odds of being attacked by a shark are roughly 1 in 11,500,000 (0.000009%).

Still, under 1% feels like good odds for taxpayers willing to take a chance. That low rate, however, can be misleading. While full audits are uncommon, returns are routinely reviewed for errors, mismatches, and out-of-range claims, and those reviews lead to IRS contact far more often than audit statistics alone suggest. Here’s what you need to know.

Most tax returns are never reviewed by a human. The IRS relies heavily on automated systems that scan returns, compare them to statistical norms for similarly situated taxpayers, and computer match reported information against data the IRS already has from third parties, such as employers, banks, and brokers.

And today, with advances in analytics and automation, returns don’t need to look suspicious to be flagged. If reported income doesn’t match a W-2 or 1099, if deductions fall outside expected ranges, or if a credit is claimed when the requirements don’t appear to be met, the return can easily rise to the top. From the IRS’s perspective, it’s low-hanging fruit—issues that can be identified quickly and addressed efficiently.

Of course, being flagged doesn’t mean the IRS has decided you did anything wrong. It means the return stood out enough to merit some follow-up. It’s true that a small number of returns are also selected at random, but most IRS contacts begin because something doesn’t line up with what was expected.

What happens after your return is flagged depends on the type of issue the IRS believes it has identified.

In many cases, the IRS........

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