Overview
If you searched what triggers an IRS audit for small business, am I at risk for a tax audit, or does claiming deductions increase audit risk, something likely feels uncertain.
Audits are not as random as people think. While not fully predictable, many audits are triggered by patterns, inconsistencies, and documentation gaps — not by claiming legitimate deductions.
Understanding audit triggers helps business owners file with confidence instead of fear.
The most common IRS audit triggers
1) Deductions that are unusually high compared to income
Large deductions are not a problem on their own. Problems arise when deductions are:
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unsupported
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inconsistent year over year
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misaligned with the business type
2) Inconsistent reporting
When numbers do not match across:
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tax returns
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bookkeeping reports
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payroll filings
…the IRS flags the return.
3) Payroll and classification errors
Misclassifying employees as contractors is a major audit trigger, especially in growing businesses.
4) Poor or missing documentation
Receipts, mileage logs, and expense support matter more than people realize.
According to the Internal Revenue Service, records should typically be retained for at least three years, and longer in some cases.
What does NOT trigger audits by itself
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claiming deductions legally
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running a small business
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having a loss one year
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working with a CPA
The issue is unsupported deductions, not deductions themselves.
How a CPA reduces audit risk
A proactive CPA focuses on:
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clean, reconciled books
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documentation standards
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consistent reporting
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alignment between financials and tax returns
This dramatically lowers risk and makes audits far less stressful if they occur.
At Avocet International CPAs, audit prevention is about accuracy and consistency, not aggressiveness.
Suggested links to include
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Internal Revenue Service – IRS audits
https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits -
Internal Revenue Service – Recordkeeping
https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping
FAQ
Do deductions automatically trigger audits?
No. Unsupported or inconsistent deductions do.
How long should I keep records?
Usually 3–7 years, depending on the situation.
Can a CPA help during an audit?
Yes. CPAs organize documentation and handle responses properly.
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