How to Avoid IRS Audits: Common Tax Mistakes to Watch For
Nobody wants a letter from the IRS saying, “You’re being audited.” While audits are rare, certain tax mistakes can increase the chances of your business drawing unwanted attention. At Velin & Associates, Inc., we help business owners navigate tax season confidently—and avoid costly errors that can lead to audits.
Here are the most common tax mistakes that could trigger an IRS audit, and how to avoid them:
- Misreporting Income
The IRS receives copies of your 1099s, W-2s, and other forms—so if your reported income doesn’t match, it’s a red flag. Underreporting income, even unintentionally, is one of the fastest ways to get audited.
✅ Tip: Keep detailed records of all revenue sources and double-check that your tax return matches the information sent to the IRS.
- Claiming Excessive Deductions
Large deductions that seem out of proportion for your business size or industry can raise suspicion—especially for things like meals, travel, and home office expenses.
✅ Tip: Only claim what’s legitimate and keep thorough documentation (receipts, logs, etc.) to support every deduction.
- Mixing Business and Personal Expenses
Blurring the lines between personal and business expenses is a common mistake that can create audit issues and potentially result in denied deductions.
✅ Tip: Maintain separate bank accounts and credit cards for your business. Keep detailed records and categorize expenses correctly.
- Incorrectly Classifying Workers
Misclassifying employees as independent contractors (or vice versa) can trigger scrutiny and lead to penalties for unpaid payroll taxes.
✅ Tip: Review IRS guidelines for worker classification and consult with a tax advisor if you’re unsure.
- Math Errors and Typos
Simple errors like incorrect totals or misentered Social Security Numbers can lead to delays—or worse, audits.
✅ Tip: Use tax software or work with a professional accountant to avoid calculation errors and ensure accuracy.
- Failing to File or Pay on Time
Late or missed filings can alert the IRS that something might be off. Penalties aside, it can flag your account for review.
✅ Tip: Set reminders for tax deadlines or work with a CPA to ensure timely filings—even if you’re filing for an extension.
- Round Numbers Everywhere
Reporting income or expenses in perfectly round numbers (like $10,000 instead of $10,183.27) can look suspicious to the IRS.
✅ Tip: Be precise. Always report actual amounts from your records—not estimates.
Final Thoughts
An IRS audit doesn’t have to be part of your business journey. By keeping accurate records, filing on time, and understanding what the IRS looks for, you can greatly reduce your risk.
At Velin & Associates, Inc., we help you stay compliant and audit-ready year-round. Let us take the guesswork out of your tax strategy—so you can focus on running your business.
📞 323-902-1000
📧 dmitriy@losangelescpa.org
🌐 www.losangelescpa.org
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.