Why this matters
The IRS doesn't pick returns at random. Its systems score returns against norms and match many information returns filed under your SSN or EIN. Most trouble isn't a dramatic audit. It's an automated mismatch letter that costs you months of correspondence. A 15-minute review before e-filing can reduce mismatch notices.
What "done" looks like
- Every 1099-NEC and 1099-K you received is reflected in reported income
- Expense categories contain accurate numbers
- Big deductions have documentation you could produce tomorrow
- Home office, vehicle, and meals entries match actual records
How to do it
- Reconcile income against 1099s. The IRS automatically matches many information returns, so investigate any income below the sum of your 1099s.
- Check the accuracy of expense amounts. Make sure the numbers reflect your actual records rather than unsupported estimates.
- Sanity-check deduction ratios. Any expense line outsized relative to revenue needs receipts behind it.
- Review vehicle use, home office, meals, and travel. Make sure each matches your records, not a guess.
- Run your tax software's final review, TurboTax's, for example, and actually read the flags instead of clicking past them.
Common mistakes
- Reporting only what hit your bank account and ignoring a 1099-K from a payment processor
- Claiming 100% business use of the only vehicle you own without records to support it
- Rounding every expense category instead of using accurate numbers from your records
Real-world examples
- The IRS CP2000 "underreporter" program can automatically mail notices when return income doesn't match third-party 1099 and W-2 data. No human audit is needed to start the process.
- Schedule C businesses reporting losses year after year may face questions under the hobby-loss rules.
From a founder's point of view
A red flag isn't a reason to skip a legitimate deduction. It's a reason to have the paper behind it. The goal isn't an invisible return. It's a return where every questioned line has a boring, documented answer.
Rule of thumb
Claim everything you can document. Claim nothing you'd struggle to explain in one sentence with a receipt in hand.
