How the IRS Selects Returns for Audit

I hear this more than you would think: "Why me?" People assume an audit means someone at the IRS read their return, got suspicious and picked up the phone. That is not how it works. The IRS will not even start an audit by telephone. Its own audit page says so plainly: the agency notifies you by mail.

Most returns that end up in front of an examiner got there through a handful of systems. Knowing which one pulled yours tells you a lot about what the examiner is going to ask, how deep the exam will go, and how worried you should be.

The odds, from the IRS Data Book

Start with perspective. The IRS Data Book 2025, Table 3-1, tracks audit coverage by the tax year of the return. For tax year 2021, the most recent year the IRS says is outside the normal three-year assessment period, the IRS had examined (closed or in process) about 0.3 percent of individual income tax returns filed. That is roughly 510,000 exams out of about 161 million returns.

Coverage is not flat. The same table shows coverage for tax year 2021 at 6.6 percent for returns reporting total positive income of $10 million or more, and 0.7 percent for returns claiming the earned income tax credit. More recent tax years show lower numbers, but the IRS warns those figures rise as exams for those years get opened. Do not read a low number for a recent year as a promise.

Low odds are not zero odds. If you are reading this, your number probably already came up. So let's talk about how.

Door one: the DIF score

The Internal Revenue Manual describes the Discriminant Function, or DIF, as "a mathematical technique used to score income tax returns for examination potential." That language is from IRM 4.1.2.6. The formulas are built from National Research Program data, and generally, the higher the score, the greater the audit potential.

Three points about DIF matter to you:

• Every individual return is scored. IRM 4.1.2.6.2 says all individual returns are computer scored under the DIF system. Yours was. So was your neighbor's.
• The formula is secret. The IRM states the DIF formulas are confidential and the score assigned to a return should not be disclosed. If an examiner tells you why you were selected, it will be in general terms. That is a rule, not evasiveness.
• A high score is not a finding. A high DIF score means a return looks different from the norm. Different is not wrong. Plenty of high-scoring returns are correct, and plenty never get worked because the IRS orders only as many returns as its examiners can handle.

That last point is important. Under IRM 4.1.2.6.7, headquarters sets a DIF cutoff score each year, and field offices order returns above the cutoff based on staffing. A return can score high and still sit in inventory until the statute runs short and nobody touches it.

What happens after the score: classification

A score alone does not start an audit. The return gets classified first. IRM 4.1.5.3 defines classification as "the process of determining whether a return should be selected for audit, the initial issues to be audited, and who should conduct the audit." The classifier is an experienced examiner, or in some programs an automated analytics tool, and the manual says returns must be classified by employees who will not be assigned to examine them.

The classifier sets the preliminary scope, and IRM 4.1.5.3.2 notes the number of classified issues is typically limited to three. That is why your initial letter usually lists specific items: a Schedule C expense, a charitable deduction, a dependency claim. Those are the classified issues. Classifiers are also told to watch for items that would produce an overassessment, meaning a refund for you, not just items that increase tax.

Some returns are routed to correspondence exams instead of field offices. IRM 4.1.2.6.2 notes that "CORR" returns are certain low and medium income non-business returns that are conducive to correspondence examinations, and they are ordered only at a national level. If you got a mail audit, that is probably the path your return took. See how a correspondence audit works.

Door two: information matching

This is the most mechanical door, and the most common reason people get letters from the IRS. Employers, banks, brokerages, payment platforms and others file information returns with the IRS: Forms W-2, 1099-INT, 1099-DIV, 1099-NEC, 1099-K and many more. The IRS matches them against what you reported.

When the numbers do not line up, the Automated Underreporter program can send a CP2000 notice proposing changes. Here is the part most people miss: the IRS does not treat that as an examination. IRM 4.19.3.1.2 points to Rev. Proc. 2005-32, which treats contacts to verify a discrepancy between your return and an information return as something other than an examination. The AUR manual even tells its own employees, in capital letters, to avoid "auditing" returns.

That distinction has real consequences, which I cover in CP2000 vs. audit: what is the difference. If you have a CP2000 on your kitchen table, start with how to respond to a CP2000.

Third-party information can also feed a full exam. Publication 556 notes that a return may be selected based on information received from third-party documentation that does not match the return.

Door three: related examinations

The IRS says on its own audit page that it may select returns "when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit."

In plain English: your return got pulled because someone else's did. If your partnership, your S corporation, a business partner or a promoter of an investment you bought is under exam, your return can come along for the ride. Examiners also look at prior and subsequent years of the same taxpayer once an exam is open. That is called scope expansion, and I explain how it works and when it is limited in when an audit expands to other years and issues.

Door four: the National Research Program

Some returns are selected at random, and the reason is statistics, not suspicion. The National Research Program studies compliance by examining a random sample of returns. IRM 4.22.1 explains that NRP data is used to estimate the tax gap and to update the DIF formulas. In other words, NRP audits are how the IRS builds the scoring system from door one.

NRP exams have their own rules and are often more thorough than a normal audit, because the IRS wants accurate data on every line. I cover them separately in what to expect from a National Research Program audit.

Other sources the IRS uses

A few more ways a return reaches an examiner:

• Amended returns and refund claims. The IRS says amended returns go through a screening process and may be selected for audit. See when an amended return gets audited.
• Information from other sources. Publication 556 lists information received from other sources on potential noncompliance. That can include referrals from other IRS functions or other agencies.
• Compliance projects. The IRS runs targeted initiatives on particular issues or market segments. The campus exam manual references compliance initiative projects as a source of work.

What is not on the list? A refund. The IRS says flatly that a refund is not necessarily a trigger for an audit. Neither is a single large deduction that you can document.

Why the selection method matters to you

The door your return came through predicts the exam you are about to have.

Selection path	What it usually means
DIF, classified as correspondence	A narrow mail audit on a few items. Documents win these.
DIF, classified for an office or field exam	An in-person exam with a broader document request and an interview.
Information matching	A CP2000 or similar notice, usually about income. Not treated as an exam.
Related examination	The issue often lives in someone else's file. Find out whose.
National Research Program	A line-by-line review, with adjustments in both directions.

What to do with this information

Read the letter closely. It tells you which items are under review, who is examining them and how to respond. Do not call the examiner to argue about why you were picked. You will not get the DIF score, and a phone call is a poor place to start answering substantive questions anyway.

Then gather documents for the listed items and nothing else, at least at first. An examiner who asks for receipts for charitable gifts does not need your entire financial life. Answer what was asked, completely, and on time.

If the exam is in person, or if the letter lists more than a couple of issues, think hard about representation before the first meeting. Knowledge is protection. You can read the firm's overview of IRS audit representation to see what that looks like.

Being selected is not an accusation. It is the start of a process with rules on both sides. Learn the rules, and the process gets a lot less frightening.