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IRS Audit Trends for 2025: Red Flags to Avoid

  • Writer: Cherie Sayban
    Cherie Sayban
  • Apr 7
  • 4 min read

Updated: Apr 22

As IRS audit trends evolve in 2025, taxpayers need to stay vigilant. With enhanced enforcement tools and a renewed focus on high-risk tax filings, the IRS is stepping up its game. If you're wondering how to avoid an IRS audit this year, understanding what triggers IRS scrutiny is key—especially for small business owners, self-employed individuals, and high-income earners.

In this article, we’ll break down the top IRS audit red flags, key trends, and how to stay compliant with expert guidance from a seasoned CPA.



IRS audit trends and red flags to avoid
Image credit: taxcommunity.com

🔍 IRS Audit Trends for 2025: What’s Changing?


1. High-Income Earners Under Review


One major audit trend in 2025 is the increased scrutiny of individuals making over $400,000 annually. The IRS is analyzing returns with advanced algorithms to uncover discrepancies in investment income, real estate, and pass-through entities.


✅ CPA Tip: Keep accurate records of income from all sources, including dividends, rental income, and K-1s from partnerships or S-corps.



2. Schedule C Filers and Self-Employed Taxpayers


Freelancers and gig workers filing a Schedule C face elevated audit risk in 2025. The IRS flags unusually high deductions or recurring losses as signs of potential abuse.


🔺 IRS Red Flag: Claiming a business loss year after year or deducting 80% of your income in expenses.

✅ CPA Tip: Track every expense with documentation. Consider using cloud-based accounting software for better audit defense.



3. Crypto and Digital Asset Reporting


Cryptocurrency tax enforcement is expanding. If you’ve bought, sold, staked, or received crypto payments, the IRS expects full reporting. New broker reporting rules mean the IRS will have transaction data from exchanges.


🔺 IRS Red Flag: Failing to disclose digital asset transactions or leaving the crypto question blank.

✅ CPA Tip: Report all crypto activity—even if no gain or loss occurred. Use crypto tax platforms or consult a CPA with digital asset expertise.



4. Employer Retention Credit (ERC) Claims


With billions in ERC credits issued, the IRS is aggressively auditing suspicious or inflated claims. Many small business owners were misled by third-party “ERC mills” into filing ineligible applications.


🔺 IRS Red Flag: Claiming the ERC without documentation, or amending past returns solely to claim it.

✅ CPA Tip: If you claimed the ERC, ensure your payroll records, eligibility tests, and financial statements are in order.



5. Foreign Assets and Offshore Income


The IRS is also cracking down on unreported foreign accounts and offshore earnings. Through FATCA and FBAR, the IRS is tracking U.S. citizens with overseas holdings.


🔺 IRS Red Flag: Not filing FBAR (FinCEN Form 114) or Form 8938 for foreign accounts.

✅ CPA Tip: If you have foreign bank accounts or investments, consult a CPA experienced in international tax compliance.



⚠️ Common IRS Audit Red Flags to Avoid


Some audit triggers haven’t changed and continue to catch taxpayers off guard:


  • Large charitable deductions inconsistent with income

  • Home office deductions that don’t meet IRS criteria

  • Rounded numbers throughout your tax return (e.g., $1,000, $5,000)

  • Mismatched 1099s, W-2s, or bank statements

  • Cash-heavy businesses like salons or restaurants



✅ How to Stay Audit-Proof in 2025


Following these tips will help reduce your audit risk and give you confidence in your filings:


  1. Keep meticulous documentation Store receipts, invoices, bank statements, and mileage logs securely.

  2. Separate business and personal finances Open dedicated business accounts and avoid personal charges on business cards.

  3. Hire a reputable CPA or tax advisor Especially if your return includes complex income, crypto, or ERC claims.

  4. Double-check your math and entries IRS audits often start from basic errors.

  5. Stay current with tax law changes What worked last year may no longer be valid in 2025.



Final Thoughts


Avoiding an IRS audit isn’t about fear—it’s about preparation. With the IRS now leveraging AI and real-time data, accuracy, transparency, and organization are more important than ever. As a CPA with over 25 years of experience, I help clients file confident, compliant returns—and navigate audits when they arise.


📞 Need a tax return review or audit defense strategy?


 Let’s connect for a consultation and make sure your finances are bulletproof in 2025.



About the Author


Cherie Sayban is a certified public accountant. She has over 25+ years of experience in Finance, Accounting and Bookkeeping.  

Certified Public Accountant, Cherie Sayban


​Cherie Sayban CPA provides various financial and accounting solutions to small and mid-size businesses. Our portfolio includes: tax preparation, payroll preparation, accounts receivable and payables, general ledger, and QuickBooks . Our bookkeeping workshops are offered both in-person and virtually.


To learn more about how Cherie Sayban CPA can help you and your business, click HERE



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To learn more about Cherie Sayban CPA's website finance services, how we can help grow your business through social media or even strategize with you on some ideas to better manage your businesses finances. Visit us at www.CherieSaybanCPA.com

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