In educational testing, differential item functioning (DIF) statistics must be accurately estimated to ensure the appropriate items are flagged for inspection or removal. This study showed how using the Rasch model to estimate DIF may introduce considerable bias in the results when there are large group differences in ability (impact) and the data follow a three-parameter logistic model. With large group ability differences, difficult non-DIF items appeared to favor the focal group and easy non-DIF items appeared to favor the reference group. Correspondingly, the effect sizes for DIF items were biased. These effects were mitigated when data were coded as missing for item-examinee encounters in which the person measure was considerably lower than the item location. Explanation of these results is provided by illustrating how the item response function becomes differentially distorted by guessing depending on the groups' ability distributions. In terms of practical implications, results suggest that measurement practitioners should not trust the DIF estimates from the Rasch model when there is a large difference in ability and examinees are potentially able to answer items correctly by guessing, unless data from examinees poorly matched to the item difficulty are coded as missing.