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IRS Audits: Why You Should NOT Cheat on Your Taxes

There’s a common myth that you can cut a few corners on your taxes, fudge the numbers, or take some liberties with deductions, especially if your business isn’t a household name. But here’s the truth: cheating on your taxes is a short-term game with long-term consequences, and we may be entering a new era of increased IRS scrutiny.

With the current administration in place until 2028 and the next likely to bring new energy to IRS enforcement, the risk of getting caught, whether it’s next year or five years from now, is growing.

Here’s what every business owner and entrepreneur needs to understand about IRS audits, the statute of limitations, and how to protect yourself through smart, honest accounting.

What Is the IRS Audit Statute of Limitations?

The statute of limitations refers to how long the IRS has to audit your tax return. Many people believe that once a couple of years go by, they’re in the clear. That’s not necessarily true.

Here’s what the IRS allows:

3 years is the standard timeframe the IRS has to audit your return.

6 years applies if you underreport your income by 25 percent or more.

No time limit applies if you never file a return or if the IRS suspects fraud.

So even if you filed your return in 2022, you may still be subject to audit through 2025, or even 2028, depending on what is discovered.

The IRS Is Being Re-Funded, and They’re Paying Attention

Under the Inflation Reduction Act of 2022, the IRS received a historic funding boost. While future administrations may adjust this funding, the current trend is clear: audits are becoming more frequent and more sophisticated.

This doesn’t just impact billionaires or major corporations. The IRS has signaled its focus includes:

  • Small business owners who blend personal and business expenses 
  • S-corporations and LLCs with aggressive deductions 
  • 1099 earners with high write-offs and little documentation 

A Complex Economic Environment Makes Mistakes More Likely

In today’s business climate—marked by inflation, shifting markets, labor shortages, and fast-changing tax laws—it’s easier than ever to make a mistake. But the IRS doesn’t always distinguish between honest mistakes and negligence.

Business owners need to be especially diligent about:

  • Accurate income reporting 
  • Proper classification of expenses 
  • Clear allocation of shared costs 
  • Keeping documentation for every deduction 

Poor bookkeeping increases your tax risk and invites unwanted attention from the IRS.

What Triggers an IRS Audit?

You don’t have to break the law to end up on the IRS radar. Common red flags include:

  • Deductions that are unusually large compared to income 
  • Round numbers that suggest estimates instead of records 
  • Failure to issue or report 1099 forms 
  • Misclassification of workers as contractors 
  • Using a business structure that doesn’t fit your operations 

How to Work With Your CPA to Stay Out of Trouble

A CPA is more than a tax filer. They are your partner in preventing risk and making sure your business stays compliant.

Here are five ways to work with your CPA effectively:

  1. Be Transparent
     Tell your CPA everything. Holding back information only increases your exposure.
  2. Keep Good Records
     Use accounting software or hire a professional. Your return is only as accurate as the data you provide.
  3. Ask Questions
     If you’re unsure about deducting something, ask. Don’t assume it qualifies.
  4. Build an Audit File
     Keep digital copies of receipts, contracts, and invoices tied to deductions. You won’t need them unless you do, and then it’s too late to recreate.
  5. Plan Ahead
     Good CPAs don’t just file taxes, they plan for them. Proactive advice can help reduce your tax burden without crossing the line.

The Bottom Line

Shortcuts on your taxes may seem tempting in the moment, but they can turn into expensive mistakes years down the line. With a newly funded IRS and an increasingly complex tax environment, there’s no room for guesswork.

Be honest. Be thorough. And work with professionals who help you do it right the first time.

If you haven’t had your tax strategy reviewed in the last few years, now is the time. A second opinion today can save you a serious audit tomorrow.