Audit Rates for High‑Income Physicians vs Other Professions: What Data Shows

The popular narrative that “doctors get audited more than everyone else” is lazy and usually wrong. The data shows something more precise: very high income self‑employed professionals, including many physicians, attract disproportionately high audit scrutiny compared with W‑2 employees in other fields. The IRS is not targeting white coats. It is targeting large, complex income with lots of judgment calls and deduction opportunities.

If you are a high‑earning physician, your audit risk does not look like the average American’s. It also does not look like a Fortune 500 CEO’s. It sits in an uncomfortable, data‑dense middle zone that most physicians seriously underestimate.

Let us walk through what the numbers actually say.

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1. What the IRS Data Actually Shows

The best public window into audit risk is the IRS Data Book and occasional deep dives by the Treasury Inspector General and GAO. They do not break out “physician” as a category. So you have to infer risk from:

• Income level
• Entity type (W‑2 vs Schedule C vs S‑corp/partnership)
• Use of specific “high‑audit” forms (Schedule C, E, F, Form 2555, etc.)

This is exactly the profile of many high‑income physicians: S‑corp or partnership K‑1s from a group practice, pass‑through income from surgery centers or imaging centers, sometimes rental real estate, plus a high W‑2 or guaranteed payment component.

Audit probabilities by income band

Pulling from recent IRS data (aggregated across all occupations), the pattern is clear: income drives audit risk.

Approximate IRS Audit Rates by Adjusted Gross Income

Category	Value
Under $200K	0.2
$200K-$500K	0.4
$500K-$1M	1
$1M-$5M	2

These are rounded, approximate field + correspondence examination rates in recent years:

• Under $200,000 AGI: about 0.2% audited per year
• $200,000–$500,000 AGI: roughly 0.3–0.4%
• $500,000–$1,000,000 AGI: around 0.8–1.0%
• $1,000,000–$5,000,000 AGI: 1.5–2.0%+

Now overlay physicians:

• Median attending doctor: total compensation often $300,000–$450,000
• Subspecialists (ortho, neurosurg, interventional cardiology, GI with ownership stakes): easily $700,000–$1,500,000+
• Practice owners with ancillary income (ASC, imaging, labs, real estate): commonly $1,000,000+ includ­ing pass‑through profits

Conclusion: a large fraction of experienced physicians live in the 0.4–2.0% audit‑rate bands, versus 0.2% for the “average taxpayer.”

So yes, high‑income physicians face 2–10x the audit probability of the general population solely based on income level.

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2. Physicians vs Other High‑Income Professionals

Income alone is not the full story. How that income is reported matters more than most doctors realize.

W‑2 executives vs physician practice owners

Compare two people with the same $900,000 of total income:

• A Fortune 500 VP with a $900,000 W‑2 and basic 401(k)
• A surgical subspecialist with:
  • $500,000 W‑2 from the group
  • $300,000 K‑1 from an S‑corp or partnership
  • $100,000 K‑1 or Schedule E from an ASC/investment LLC

These two taxpayers do not face the same audit profile, even at the same income.

Profile	Key Forms	Relative Audit Exposure*
W‑2 executive	W‑2, Schedule A	Low
Employed hospitalist physician	W‑2, Schedule A	Low‑moderate
Physician partner (group)	W‑2, K‑1, Schedule E	Moderate
Multi‑entity physician owner	W‑2, K‑1s, 199A, E	High
Self‑employed 1099 physician	1099‑NEC, C, SE, 199A	High

*Relative to taxpayers with similar income but fewer complex schedules.

The IRS audit selection algorithms (DIF scores and related systems) put much more attention on:

• Schedule C (non‑employee compensation, self‑employment)
• Schedule E (rental and pass‑through entities)
• K‑1 income from partnerships and S‑corps
• Significant “other deductions” not tied to third‑party reporting

Many large‑firm attorneys, partners in consulting firms, and high‑end real estate brokers look similar to physician practice owners on paper. The risk profile is comparable: 1–3% in many income buckets, sometimes higher where the returns show aggressive patterns.

So the question “Are high‑income physicians audited more than other professions?” is sloppy. You need to ask:

• Are high‑income, entity‑heavy physicians audited more than W‑2 tech executives? Yes.
• Are they audited more than law firm or accounting firm partners with similar income structures? Generally no; they sit in the same risk band.

The IRS is watching the structure, not the specialty.

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3. Where Physicians Diverge From Other Professions

Even inside the high‑income bucket, physicians have a specific pattern the IRS sees over and over. That pattern carries its own triggers.

3.1 The 1099 / Schedule C problem

Hospitalists, anesthesiologists, radiologists, EM docs, and locums physicians often receive large 1099‑NEC payments instead of W‑2 wages. These often hit Schedule C, especially for solo‑practicing physicians.

The data shows Schedule C filers have a significantly higher audit rate than W‑2‑only taxpayers at the same income level, particularly when:

• Gross receipts exceed roughly $200,000
• Net profit margin looks “too clean” (e.g., 90%+ profit with minimal expenses)
• Expense ratios do not align with peer norms in IRS data

Relative Audit Likelihood by Filing Profile

Category	Value
W-2 Only, $300K	1
W-2 + K-1, $300K	2
Schedule C, $300K	3
Schedule C, $600K	5
Multi-entity owner, $1M+	6

Indexing W‑2‑only at 1x risk, the relative pattern is roughly:

• W‑2 only: baseline
• W‑2 + modest K‑1: ~2x
• Schedule C $300,000: ~3x
• Schedule C $600,000: ~5x
• Multi‑entity owner at $1M+: 5–6x or more

This pattern applies across professions. But physicians have a high concentration in the Schedule C + K‑1 buckets, so they feel this more than, say, software engineers.

3.2 Common physician‑specific red flags

From actual audits I have seen, these items recur in physician files:

1. Excessive CME and conference write‑offs

   • Multiple “conferences” in resort locations
   • Family travel included in business expenses
   • Weak documentation connecting conference to active clinical practice

2. Home office deductions

   • Claimed by employed physicians who do nearly all work in hospital or clinic
   • Floor plans and usage rarely documented
   • Deducting large portions of rent, utilities, or even home remodels

3. Vehicle expenses

   • Large SUV “100% business use” for commuting between home and a single hospital
   • Mileage logs reconstructed after the fact, if at all

4. Medical equipment and supplies

   • Laptops, iPads, high‑end monitors “for EMR access,” often dual‑use
   • Scrubs, shoes, and similar items that are arguably personal clothing

Each of these is not unique to physicians, but the pattern is distinctive enough that busy local IRS agents will literally say, “This looks like every doctor’s return I see.” That is not a compliment.

Contrast this with a salaried CFO or software VP who has:

• W‑2 income
• Basic charitable, mortgage, and SALT deductions
• Maybe some RSUs and stock sales on 1099‑B

Their return is mostly third‑party‑reported. Very little room (or temptation) for “creativity.” Audit algorithms favor this simplicity.

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4. High‑Income Physicians vs Other Fields: A Direct Comparison

Let me stack up typical profiles around the same income levels to make this concrete.

At ~$350,000 of total income

• Employed orthopedic surgeon at a hospital system

  • W‑2: $350,000
  • Deductions: 401(k), HSA, maybe itemized mortgage/SALT
  • Audit risk: not far from a high W‑2 engineer or executive; modestly above average, but low in absolute terms

• Senior software engineer at a FAANG company

  • W‑2 + RSUs: $350,000
  • Mostly all reported by third parties
  • Audit risk: similar to above; the IRS has nothing to argue about except basis tracking on stock

• Contract anesthesiologist (1099)

  • 1099‑NEC gross: $350,000
  • Schedule C: large business deductions, maybe spouse on payroll
  • Self‑employment tax and 199A interactions
  • Audit risk: meaningfully higher; the return is more complex, with more subjective elements

Same dollar income. Very different audit profile.

At ~$900,000 of total income

• Big‑law partner

  • K‑1 income from partnership: $900,000
  • Large state and local tax burden, often limited by SALT cap
  • Complex partnership allocations, but the law firm’s return is usually meticulous
  • Audit risk: high but mostly at the entity level; individual often targeted only if there is a partnership issue

• Multi‑entity cardiologist owner

  • W‑2: $450,000
  • K‑1 from group practice: $250,000
  • K‑1 from ASC and imaging center: $200,000
  • Passive vs non‑passive classification, 199A, possibly real estate
  • Audit risk: similar band to big‑law partner, but in practice, physicians often have weaker entity and documentation discipline than large law firms

• Corporate VP at a public company

  • W‑2 + vested RSUs: $900,000
  • Mostly third‑party‑reported; some complexity around equity comp
  • Audit risk: significantly lower than the physician owner and law partner, even with the same income

So where do physicians land relative to other professions?

• Higher risk than high‑income W‑2‑only professionals at similar incomes
• Comparable risk to other high‑earning partners and self‑employed professionals (law, consulting, accounting, real estate)
• Risk concentrated in specific return patterns: Schedule C, multiple K‑1s, large deductions with weak third‑party reporting

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5. How Physicians Actually Get Selected for Audit

The IRS does not have a “physician” flag. It has math. Here is how that math tends to punish doctors.

5.1 DIF scores and peer norms

The IRS uses a Discriminant Function System (DIF) to score how “abnormal” a return looks compared to peers with similar:

• Income level
• Filing status
• Business or occupation codes
• Types of income and deductions

The data shows that outliers in:

• Business expense ratio to gross receipts
• Schedule C profit margin
• Charitable giving as a percent of income
• Unreimbursed business expenses (where still applicable)

get singled out. Many physicians are outliers because they:

• Earn high wages but also have relatively high living and consumption costs
• Try to “run” some of their lifestyle through the business (travel, vehicle, gadgets)
• Combine multiple revenue streams in ways the IRS system flags as complex

5.2 Document mismatch

Physicians also get caught in lower‑level “correspondence audits” triggered by mismatch:

• 1099‑NEC or 1099‑K issued by a group or locums agency that is not properly reported
• 1099‑INT or 1099‑DIV from brokerage accounts overlooked
• Early distribution penalties on retirement accounts missed

These are common in other high‑income professions too. The difference is that physicians juggling shifts at three hospitals plus a side LLC tend to accumulate more 1099s than, say, a single‑employer VP.

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Simplified IRS Audit Selection Flow for High Income Physicians

Step	Description
Step 1	File Tax Return
Step 2	Income Level Check
Step 3	Low Priority Pool
Step 4	Complexity Scan
Step 5	Standard DIF Score
Step 6	Enhanced DIF Score
Step 7	No Audit
Step 8	Human Review
Step 9	Audit Selected
Step 10	Schedules C/E/K-1?
Step 11	Score Above Threshold?
Step 12	High Yield?

This is simplistic, but directionally accurate. Physicians with multiple entities live in that “Enhanced DIF Score” box.

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6. What the Data Suggests for Physician Tax Planning

If you accept that high‑income physicians are structurally higher‑risk than the average taxpayer, you adapt. You do not hide. You build returns that survive scrutiny.

6.1 Use complexity only where the numbers justify it

I see physicians at $300,000 of total income tangled in:

• S‑corp structures
• Management companies
• Family partnerships

to save maybe $5,000–$10,000 per year in tax, at the cost of doubling their audit visibility.

By contrast, a physician at $1.5M of total income should be using entities and advanced planning. The savings are six figures over a few years, and the incremental audit risk is a rational tradeoff if the documentation is solid.

The data‑driven rule:

• Below ~$400,000–$500,000 and mostly W‑2? Keep it simple.
• Above ~$500,000 with growing non‑W‑2 income? Complexity is justified, but you must treat the tax structure like part of your practice infrastructure, not an afterthought.

6.2 Run “audit‑ready” books, not just tax‑ready

The most painful audits I have seen were not about fraud. They were about sloppiness:

• No mileage logs
• No receipts for large travel expenses
• CME “conferences” with no agenda or proof of attendance
• “Medical consulting” arrangements with family members as employees with no time records

From a probability standpoint, your risk as a high‑income physician might be 1–3% per year. Over a 20‑year career, that is a non‑trivial cumulative probability of at least one exam.

So you build systems:

• Separate business and personal bank/credit accounts
• Real‑time expense tracking categorized clearly
• Digital storage of receipts >$75 and anything that looks “luxury”
• Contemporaneous mileage or vehicle use logs

Not because you expect an audit this year. Because the base rate over your career says there is a decent chance you will face one at least once.

6.3 Choose tax advisors who understand physician risk profiles

The worst combination is:

• High‑income, entity‑heavy physician
• Plus a “tax reduction guru” selling aggressive strategies based on edge‑case interpretations

The IRS has seen most of these games already: management companies that do nothing, sham leases with family, “consulting fees” to kids, or medical practices trying to squeeze personal consumption into business deductions.

You want a CPA or EA who:

• Works routinely with 1099 physicians, group practice partners, and physician owners
• Will quantify risk: “This saves you $X, but raises audit visibility by Y; here is why I am or am not comfortable with it”
• Designs documentation up front, instead of improvising after an audit notice arrives

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Physician Career Audit Probability Estimate

Category	Value
Year 1	1
Year 5	5
Year 10	10
Year 20	19

If your annual audit chance averages ~1% over a long career, cumulative probability of at least one audit over 20 years is roughly 18–20%. That is not rare. It is a scenario you plan for.

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7. The Bottom Line: How High‑Income Physicians Really Compare

Condensing the data into blunt statements:

• High‑income physicians are not uniquely targeted as a profession.
• They are overrepresented in high‑audit‑risk filing patterns: large Schedule C, multiple K‑1s, and complex pass‑through structures.
• Compared with W‑2 executives or engineers at the same income, physicians with significant self‑employment or ownership income face noticeably higher audit exposure.
• Compared with law partners, consulting partners, and other self‑employed high earners, physicians’ audit risk is similar, sometimes worse when their entity and record‑keeping hygiene is weaker.
• Good planning is not about avoiding IRS attention completely. It is about ensuring that, if scrutinized, your return looks boringly consistent with the data on your peer group.

You cannot change that you earn a high income. You can change whether your return looks like a clean, well‑documented business or a chaotic side hustle.

That is the real lever.

You are in the “Financial and Legal” phase of your planning now. The next logical move is to tie this audit‑risk understanding into a full tax strategy: entity selection, compensation design, retirement and defined benefit stacking, and practice sale planning. That is a longer conversation—but the audit data you have now should drive how aggressively (or conservatively) you play that game.

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FAQ

1. Are physicians actually audited more than other high‑income professionals?
No, not as a class. The IRS does not explicitly target “physicians.” However, many high‑income physicians use filing structures (Schedule C, multiple K‑1s, complex pass‑throughs) that carry the same elevated audit risk seen in law partners, consultants, and other self‑employed high earners. Compared with W‑2‑only executives at the same income, physicians with these structures are audited more frequently.

2. Does incorporating my practice as an S‑corp or partnership reduce or increase my audit risk?
It typically increases complexity and therefore audit visibility, but it can be justified by meaningful tax savings if your income is high enough. Moving from a simple Schedule C to an S‑corp or multiple K‑1s will usually push your return into a higher‑risk bucket, especially above $500,000 of income. The key is whether you maintain clean entity separation and documentation that would stand up in an exam.

3. Are 1099 locums or contractor physicians more likely to be audited than employed W‑2 physicians?
Yes. A 1099 physician filing a large Schedule C with significant deductions is statistically more likely to draw IRS attention than a similarly paid W‑2 hospital employee. The self‑employed return offers more opportunities for subjective deductions and errors, and the IRS knows this. The audit rate difference is material, especially once Schedule C income exceeds a few hundred thousand dollars.

4. What specific deductions on physician returns tend to trigger questions?
Repeated trouble spots include: high CME and conference expenses (especially in resort locations), home office deductions for physicians who primarily work in hospitals or clinics, aggressive vehicle deductions (large SUVs claimed as nearly 100% business use), and high “other expenses” on Schedule C without clear documentation. Charitable giving that is unusually high as a percentage of income can also attract scrutiny if not properly substantiated.

5. If my income is over $1 million as a physician, should I expect to be audited?
You should expect a materially higher probability of audit over your career, but not a certainty in any particular year. Recent data suggests individual audit rates in the 1.5–3% range annually for incomes above $1 million, varying by complexity. Over 20 years, that compounds into a meaningful chance of at least one exam. The rational response is not fear, but designing your tax structure and documentation so that an eventual audit is an inconvenience, not a financial crisis.