What Business Owners Should Know About 2025 IRS Audit Priorities
Monday, September 29, 2025
As the IRS sharpens its strategies in 2025, understanding audit priorities is more important than ever for business owners. Here’s what to know and how J&S Accounting can help keep you audit-ready.
IRS Audit Strategy: Targeted, Not Universal
1. More Funding, Sharper Focus
The Inflation Reduction Act (IRA) gave the IRS an $80 billion boost for enforcement and modernization. This funding means:
- More aggressive audits for high-value taxpayers
- Expanded digital tools
- Improved customer service
2. Who’s Really in the Audit Spotlight?
Certain groups are seeing increased scrutiny:
- High-Net-Worth Individuals: Those earning over $10M annually will see audit rates rise from 11% to 16.5% by 2026.
- Large Corporations: Companies with assets above $250M face nearly triple the audit rate, from 8.8% in 2019 to 22.6% by 2026.
- Complex Partnerships: Partnerships with assets over $10M will see audits grow from 0.1% to about 1%.
- Schedule C Filers: Sole proprietors and self-employed taxpayers face heightened review.
Other red flags include:
- Consistent Business Losses – Repeated annual losses may lead the IRS to classify your work as a hobby.
- Cash-Intensive Businesses – i.e., Restaurants, salons, food trucks, and others relying heavily on cash are under more scrutiny.
Audit Triggers for All Taxpayers
- Unreported Income – Returns are matched against W-2s, 1099s, and now even digital payment platforms (Venmo, PayPal, Etsy).
- Significant Deductions – Claiming higher-than-average deductions for your income level raises red flags.
- Earned Income Tax Credit (EITC) – Frequently audited due to improper claims.
- Cryptocurrency Transactions – The IRS has a compliance campaign focused on crypto.
- Foreign Assets – Missing FBAR or foreign asset disclosures can eliminate statute of limitation protections
- Home Office & Vehicle Deductions – Commonly misused, often audited.
- Math Errors & Typos – Small mistakes can trigger a review. E-filing helps minimize this risk.
What Business Owners Should Do Now
✅ Understand Your Audit Risk
While small businesses may not see increased audit rates, anomalies, like aggressive deductions or mismatched income, still attract attention.
✅ Be Audit-Ready for Complex Filings
If your business involves partnerships or intricate financial structures, keep meticulous records and documentation.
✅ Stay Organized & Transparent
- Maintain clear documentation for all deductions and expenses
- Reconcile accounts monthly to catch discrepancies early
- Keep payroll and contractor classifications accurate
Next Steps with J&S Accounting
The IRS is becoming more precise with enforcement, but that doesn’t mean your business is automatically in the crosshairs. Accuracy, organization, and documentation are your best defense.
At J&S Accounting, we help you:
- Assess your audit risk
- Organize and validate your records
- Navigate IRS inquiries with confidence
- Streamline reporting for peace of mind
Contact us today to safeguard your business and ensure you’re always audit-ready.
About J&S Accounting
At J&S Accounting, we provide expert bookkeeping services tailored to the unique needs of small businesses and non-profits. We recognize the challenges that come with maintaining accurate financial records and how vital this is for the smooth operation and growth of your business. As a woman and minority-owned firm, we’re proud to offer our expertise to businesses in Savannah, GA, and across the nation, helping them navigate financial complexities and achieve better financial management.
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Are you your own boss? Do you have a trade or business that you run as a sole proprietor or independent contractor? Maybe you’re a member of a partnership, or you have a part-time business on the side. As exciting as this can be, it also brings certain fiscal responsibilities, like filing an annual tax return, paying estimated taxes every quarter, and handling self-employment tax.
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Disclaimer:This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business from a professional accountant. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. J&S Accounting does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. J&S Accounting does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.
© 2023 J&S Accounting. All Rights Reserved.
Disclaimer
This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business from a professional accountant. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. J&S Accounting does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. J&S Accounting does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.