No, you are not more likely to get audited for filing a tax extension. Contrary to common belief, filing an extension does not increase your audit risk and, in some cases, can reduce it by allowing more time for accuracy, reducing errors, and avoiding late-filed, corrected forms. The IRS processes extensions automatically without increasing scrutiny.
And remember: tax filing extensions do NOT increase your audit risk. As long as you pay any taxes owed by the original deadline and file your return by the extended deadline, you're in good shape.
An extension gives you extra time to file, but not extra time to pay. After you file an extension, if you owe taxes when you file your return, you might also have to pay penalties and interest on the tax due.
That being said, it's important to be aware of “triggers” for IRS audits, below is a list of some of the more egregious items.
For those who are terrified of extensions, remember that they're okay. Unless you file for extensions for years and years, they're not going to increase your chance of being audited, and they won't have any consequences if you pay your taxes on time.
Unreported income
The IRS receives copies of your W-2s and 1099s, and their systems automatically compare this data to the amounts you report on your tax return. A discrepancy, such as a 1099 that isn't reported on your return, could trigger further review.
The CBDT's extension of the tax audit due date to October 31, 2025, provides a welcome relief for taxpayers and professionals. However, it is essential to utilise this additional time effectively to avoid penalties under Section 271B.
Many people worry about IRS audits. But the chances of being audited are actually very low for most individuals. Recent IRS data shows the IRS examined 0.40% of individual returns filed and 0.66% of corporation returns filed. Most of the IRS's focus is on large businesses and high-income earners.
What happens during an audit? Internal audit conducts assurance audits through a five-phase process which includes selection, planning, conducting fieldwork, reporting results, and following up on corrective action plans.
Audit risk in 2025 is driven by both individual behavior and IRS algorithms. Common triggers include high income, unusually large deductions, unreported freelance income, filing errors, and business classification issues.
The late filing penalty is 5% of the additional taxes owed amount for every month (or fraction thereof) your return is late, up to a maximum of 25%. If you file more than 60 days after the due date, the minimum penalty is $525 (for tax returns required to be filed in 2026) or 100% of your unpaid tax, whichever is less.
Using a reputable tax preparer – including certified public accountants, enrolled agents or other knowledgeable tax professionals – can also help avoid errors.
Even if filed on time, some tax extension requests are rejected on or after the deadline. You'll get a notice from the IRS if your extension request is denied.
Not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.
However, you can reduce the chance of audit significantly by paying careful attention to detail and recognizing whether you are reporting a transaction of special interest to the IRS. And if you do get audited, having accurate and complete records and professional advice can make the process go more smoothly.
IRS Audit Red Flags 2023: 25 Tax Return Audit Risk Factors
Audit tips and tricks key takeaways:
Internal Audit Reports: The 5 Cs
Criteria: What needs to be audited and why? Condition: What are the observed circumstances surrounding any issues? Consequence: How do the issues found affect the company? This might include financial, regulatory, security, publicity, or other effects.
Well established processes may only need to be audited annually, while new or complex processes may need to be audited quarterly, or even monthly. Establishing an internal audit program with audits occurring at planned intervals will help your organization be on board with the internal audit process.
Initially included in the American Rescue Plan Act of 2021, the lower 1099-K threshold was meant to close tax gaps by flagging more digital income. It required platforms to report any user earning $600 or more, regardless of how many transactions they had.
If the deductions, losses, or credits on your return are disproportionately large compared with your income, the IRS may want to take a second look at your return. Taking a big loss from the sale of rental property or other investments can also spike the IRS's curiosity.
Remember, you will be contacted initially by mail. The IRS will provide all contact information and instructions in the letter you receive. If we conduct your audit by mail, our letter will request additional information about certain items shown on the tax return such as income, expenses, and itemized deductions.
While many believe that filing an extension increases your chance of an audit, the opposite is actually true.
On May 2, 2024, the IRS announced that it would be ramping up audits targeting large businesses and high-income individuals by “sizable percentages” in 2025 and 2026. Specifically, it announced plans to: Nearly triple audits targeting large corporations (those with assets over $250 million);
Some of the major tax changes effective from April 1, 2025, are revised tax slabs, rebate of up to Rs. 60,000, revised ITRU deadlines, calculation of partner's remuneration allowable as a deduction and revised TDS/TCS threshold limits.