What is the likelihood of being audited?

This is a difficult question to answer.  The IRS computers use several criteria to target returns for audit, including if the current return shows much less income than the past year, an extremely high amount in deductions, or if the income and expenses exactly match.  The IRS also targets certain groups from time to time to audit.  Anyone using a Schedule C for small business is always at risk. The IRS uses different programs to decide on audits, including a voluntary disclosure program and a new computer formula to identify returns with a high probability of unreported income. The IRS is aggressively seeking out the promoters and users of tax scams, and have identified their “dirty dozen” on the IRS website. Finally, a number of tax returns are chosen entirely at random for audit each year. In summary, the IRS is getting tough on non-filers, people who underreport their income and people who claim false deductions.  If a person knows he has filed an incorrect return, it is better to amend the return instead of waiting for the IRS to come to him.