In the most recent year the IRS counts as settled, it examined about 0.3% of individual returns, three in a thousand. For most business owners, the fear of an audit is running well ahead of the math.
That 0.3% is also not spread evenly. It is flat and low across the middle, where most owners are, and it rises only at the two ends of the income scale. The average tells you almost nothing about your own odds.
The 0.3% needs one caveat, and it is the one the scary headlines skip. The IRS reports audit "coverage" every year in its Data Book, in Table 3-1 (older editions called it Table 17). I am quoting Tax Year 2021 on purpose. Audits take years to close, so the most recent years always look artificially low, and the IRS flags 2021 as the most recent year outside the normal statute period, past the audit window in plain terms. A 0.1% rate from 2023 is an unfinished count; those exams are not closed yet.
Break the average apart and the shape is lopsided. From roughly $25,000 to $500,000 of income, the audit rate sits around 0.2%, about two returns in a thousand. The 0.3% average runs higher than the middle only because the extremes pull it up. If your income lives in that range, the average overstates your risk.
At the very top, the rate climbs hard. Returns reporting $1M to $5M were audited at 0.9%, $5M to $10M at 3.9%, and $10M and up at 6.6%, roughly 30 times the middle. But those rates only apply at income levels most business owners will never report.
The other high point is the bottom, and it is the part most coverage leaves out. Returns claiming the Earned Income Tax Credit were audited at 0.7%, more than triple the middle. The usual explanation is that EITC returns are mostly cheap, automated correspondence audits, so a credit for lower-income workers draws more scrutiny than a comfortable middle-class return, and the rate runs high year after year, not just in 2021.
If you don't trust one agency grading its own work, take the outside view. The GAO, Congress's nonpartisan watchdog, looked at 2010 to 2019 and found the same shape: overall rates fell from 0.9% to 0.25%, the steepest drops were at $200,000 and up, and EITC filers stayed above average.
One row in that table looks alarming and isn't yours. Table 3-1's "No total positive income" line shows a high 1.8% rate, but that is the loss-and-refundable-credit category, not the middle-income earner you're picturing.
Keep clean books and records, always. The low audit rate is no help once your return is the one that gets pulled, and an audit you can't document is the one that gets expensive. The data is still worth knowing: examinations cluster at the very top and the very bottom of the income scale, not in the middle where most owners sit, so a middle-income owner's odds are low. They are not zero. Enforcement could shift over the next few years as IRS funding changes, and the 2022 and 2023 numbers won't be readable until those exams close. So read the real picture, but keep the records that decide how an audit goes if your number ever comes up.