As a rule the IRS audits the traditionally non-compliant taxpayers:  

1. Small Business Payers 

2. International Payers 

3. High-Wealth Payers 

4. Earned Income Tax Credit fraud schemes.  

Audits are not the only way the IRS scrutinize tax returns. Some algorithms employed result in automated checks on filings.  The automated underreporter program (IRS CP2000) matches income and IRS information, ad red flag discrepancies, for which explanations requests are automatically generated.  This system outnumbers audits by 3.1 to 1.  

The budgetary constraints have even impacted the automated checks. Despite these IRS CP2000’s not being audited, it enhances the IRS’s ability to challenge taxpayer’s returns. When combined (rates for CP2000 matching and returns challenge), the odds of the IRS challenges you come to 1/35 rather than the audit odds of 1/161!  What's The Damage?  It is costly to be audited.  

More than 90% of all taxpayers (individuals) who undergo and IRS audit, will face an additional payment; for an old fashioned field audit, this extra payment – and shock to the system – will come up at an average of $21,918.  The same average for a “mail audit” will be less, and averages out at $6,014.

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