"In 2024, high-income taxpayers were more than twice as likely to be audited compared to previous audit cycles. What are the most common audit red flags to avoid? Searching for 2025 information online yields little actionable guidance, even in industry journals. There are a host of articles explaining low-income audits, such as those incorrectly filing for the Earned Income Tax Credit. However, middle-class, high-income taxpayers and business owners often struggle to maintain compliance with limited publicly available guidance."
"Schedule C is the IRS form used by single-member LLCs, sole proprietors, contractors, freelancers and anyone receiving a 1099-NEC. Audit rates are significantly lower for S corporations or C corporations, but Schedule C returns remain prime targets. Whether your side gig involves legal consulting or you work full-time as a contract telehealth provider, the IRS pays close attention because Schedule C returns are easy to self-prepare. Expense overstatements, often unintentional, are common and frequently trigger audits."
High-income taxpayers faced more than double the audit likelihood in 2024 compared with previous cycles. Limited actionable guidance exists for 2025, leaving middle-class and high-income business owners uncertain about compliance. Schedule C filers — including single-member LLCs, sole proprietors, contractors and freelancers — receive heightened scrutiny because those returns are easy to self-prepare. Common triggers include overstated business expenses, aggressive deductions promoted on social media, incorrect residency reporting and other high-risk strategies. Maintaining impeccable records, reporting residency accurately, choosing appropriate business entity structures and avoiding overly aggressive tax positions can materially reduce audit risk.
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