Key Steps to Help Reduce the Risk of Audits

Sep 29 2026 19:08

Stay on Top of Payroll Tax Deposits and Filings

Handle payroll taxes accurately and on time. Errors can lead to penalties and draw the IRS's attention. Payroll tax problems are serious because they involve taxes withheld from employee wages. If deposits are late, short, or made incorrectly, the IRS can assess penalties and may take a closer look at payroll compliance.

Ensure Personal and Business Spending Make Sense

The IRS may look beyond the business return when reviewing income. If business income appears low butpersonal spending appears high, there should be a clear explanation, such as savings, loans, a spouse's income, distributions, or other documented sources of funds.

Be Careful With Reported Business Losses

It is not unusual for a business to have a down year, especially during the early stages or during a slower season. However, repeated losses with no clear path to profit can raise questions about whether the activity is truly being operated as a business. Keeping a business plan, tracking performance, adjusting operations, and documenting your profit motive can help support your position.