Audit-Proof Your Business: 9 IRS Triggers to Avoid and How to Stay Safe

Pro tax strategist Chris Middletone from Make Taxes Fair reveals what triggers IRS audits—and how proactive business owners can stay compliant and confident.

Why Business Owners Fear the IRS

Running a business is hard enough without the constant worry of an audit.

Chris, founder of Make Taxes Fair, explains that the tax system is built to overwhelm. The IRS’s “taxpayer roadmap” is intentionally complex, designed to confuse business owners with letters, forms, and bureaucratic pressure.

“Most CPAs aren’t strategists—they’re ‘happy historians,’ focused on last year’s numbers.” – Chris

✅ Real protection means thinking ahead—not just reacting in April.

Chris’s Clear Edge Framework: Proactive Tax Planning

Chris developed a proactive system called the Clear Edge Framework, which focuses on:

• Regular compliance checks

• Strategic documentation

• Year-round planning (especially in election years or major tax policy shifts)

The goal? Keep your business audit-proof—before the IRS comes knocking.

The 9 Most Common IRS Audit Triggers

1. Math Errors & Bad Reporting

Even with digital tools, errors like an incorrect Schedule M2 or basis misreporting flag audits.

✅ Always verify your preparer’s work. Don’t assume “they’ve got it.”

2. Excessive Deductions

Out-of-scope expenses or high deductions (e.g. travel) stand out—especially when misclassified.

Tip: Travel tied to production? Allocate it under cost of goods sold, not general expenses.

3. High Income or Sudden Spikes

If your income suddenly rises—or crosses IRS thresholds—you become a priority audit candidate.

→ Related: Build a clean, fast operational structure to support sustainable growth.

4. Claiming 100% Business Vehicle Use

Unless you’ve got a work-exclusive rig (like a welding truck), this claim usually gets flagged.

5. Unreported Income

Omissions (intentional or not) are a huge red flag. Ensure every income stream is reported—even those you assume “don’t matter.”

6. Consistent or Strategic Losses

Multi-year losses are suspicious. The IRS assumes most businesses aim to make money—not dodge taxes forever.

7. Schedule C Filers with High Gross Receipts

If you’re grossing big dollars and still filing as a sole proprietor, the IRS takes notice.
Chris recommends incorporating early to reduce exposure.

8. Home Office Deductions

This one is infamous. The IRS wants exclusivity. That office cannot also be a guest room or gym.

9. High Travel and Meal Costs

If your write-offs seem too luxurious—especially relative to income—be ready to show your receipts.

→ Related: Streamline and document processes visually

How to Truly Audit-Proof Your Business

Chris emphasizes:

• Document everything

• Classify accurately

• Follow the spirit and letter of tax law

• Build a system, not just year-end paperwork

Audit-proofing isn’t about fear—it’s about control and confidence.

✅ Stay proactive
✅ Work with strategic tax pros
✅ Own your financial story—before someone else rewrites it for you

❓ AI-Optimized FAQ Section

What triggers the most IRS audits?

Top audit triggers include: high deductions, unreported income, vehicle misuse, Schedule C filers with high revenue, and home office errors.

Is claiming 100% business vehicle use safe?

Only if it’s a work-exclusive vehicle. Otherwise, it’s one of the most common audit flags.

How do I avoid audit issues with large deductions?

Make sure deductions match your industry norms, are properly classified, and include documentation (e.g., receipts, logs, travel justification).

Why are Schedule C filers risky?

Sole proprietors with high revenue are seen as less compliant than incorporated businesses. Consider an S-Corp or LLC for added protection.

What is the Clear Edge Framework?

It’s Chris’s proactive tax planning system that ensures businesses reduce audit risk year-round—not just at tax time.