IRS AUDIT RISK CHECKLIST (2025 Edition)

Getting audited isn’t about luck — it’s about preparation.

With IRS systems becoming more automated and 1099 reporting expanding, small business owners and freelancers need to stay sharp.

Here’s your 2025 IRS Audit Risk Checklist — the practical steps every taxpayer should take to file smart, stay compliant, and avoid unnecessary stress.

✅ 1️⃣ Report All Your Income

The number one reason taxpayers get flagged for an audit? Unreported or mismatched income.

The IRS receives copies of your:

• 1099s (freelance income)

• W-2s (employee income)

• 1099-Ks (payment apps like Venmo, PayPal, CashApp, Etsy, and eBay)

If your reported income doesn’t match what these third parties send to the IRS, their system flags it instantly.

This year, more small sellers and gig workers will receive 1099-Ks, even for side hustles — so accuracy matters.

💡 Pro Tip:

Keep a simple spreadsheet listing all 1099s before you file. Double-check that your total matches your tax return.

✅ 2️⃣ Keep Deductions Realistic

Yes, deductions lower your taxable income — but overdoing them can raise red flags.

Watch for these common triggers:

• Large or inconsistent write-offs from year to year

• Home office claims (must be exclusive and regular use)

• Charitable donations without proper receipts

• “Business meals” that don’t include who and why

Big write-offs = big attention 🚨

If you claim something, make sure you can prove it.

💡 Pro Tip:

If a deduction looks “too good to be true,” it probably is. When in doubt, ask a tax professional to review it.

✅ 3️⃣ Track Your Small-Business Activity

If you’re self-employed or a small business owner, the IRS pays close attention to your Schedule C.

That’s because it’s easy to blur the line between personal and business expenses.

Be especially careful if:

• You’ve had repeated losses (IRS may classify your work as a hobby, not a business)

• You mix personal and business accounts

• You don’t track expenses regularly

💡 Pro Tip:

Create a folder on your phone or cloud labeled “2025 Taxes” and snap photos of receipts monthly.

Consistency = credibility.

✅ 4️⃣ Stay Ready, Not Worried

Audits are less scary when your records are organized.

If the IRS sends a letter, you’ll have everything you need to respond quickly.

Keep:

• Tax records for at least 3–7 years

• Digital backups of returns, 1099s, and expense proof

• A quick response plan (call your CPA or tax pro immediately)

💬 Pro Move:

A clean paper trail = faster resolution and less stress.

⚡ Bonus: Be Proactive

The best way to stay out of audit trouble is to stay ahead of your finances all year.

✔️ Review income and expenses quarterly

✔️ File early — don’t wait until April

✔️ Use a professional tax preparer or trusted software

💼 Need Expert Help?

At LHG Tax & Bookkeeping, we help individuals and small businesses:

✅ Avoid IRS surprises

✅ Maximize deductions legally

✅ Keep books clean, accurate, and audit-ready

Ready to file with confidence?

📞 Schedule your consultation today at LottHeritageGroup.com