Welcome to The Profit Ledger — your go-to spot for smart bookkeeping tips, tutorials, and tools for small business success. We keep you informed, compliant, and confident — even when it comes to the IRS.
Lately, you might have heard rumblings that the IRS is “coming for small businesses.” Whether it’s from news headlines, accounting forums, or social media doomsday takes, the concern is real:
Is the IRS targeting small businesses more than ever?
Let’s unpack the facts, the fears, and most importantly — what you can do to stay audit-ready and stress-free.
🔍 Why People Think the IRS Is Focusing on Small Businesses
There are a few factors driving the perception — and some of them have teeth:
1. $80 Billion in New IRS Funding
Thanks to the Inflation Reduction Act, the IRS received a massive funding boost over the next 10 years, with a portion specifically allocated for enforcement.
While high-net-worth individuals and large corporations are also in the spotlight, the concern is that small businesses are easier targets because:
- They’re often less sophisticated
- More likely to have cash-heavy operations
- May have DIY or inconsistent bookkeeping
- Don’t always understand their audit risk
2. Rise of Gig and Digital Economy
From side hustlers to e-commerce sellers, the IRS is increasingly interested in the under-the-radar economy — and they’re using 1099s, payment processors, and new reporting thresholds to catch it.
Starting in 2024, for example, payment apps like Venmo and PayPal must report business transactions over $5,000 (down from $20,000 previously).
3. Tax Gaps and Misinformation
The “tax gap” — the difference between what taxpayers owe and what actually gets paid — is largest in areas like small business income, where underreporting and casual compliance are common.
And with TikTok “tax advice” and overzealous write-off tips flooding social media, the IRS has more reason than ever to double-check small business returns.
📊 What the IRS Has Actually Said
According to the IRS, their enforcement efforts are focused on:
- High-income earners
- Complex partnerships and large corporations
- Tax evasion schemes
The agency has also emphasized that they are not targeting everyday small business owners. But that doesn’t mean small businesses are immune — especially if there are red flags.
🚩 Common IRS Red Flags for Small Businesses
You may raise audit risk if you:
- Report large losses year after year
- Take excessive deductions (especially meals, vehicles, or home office)
- Misclassify employees as independent contractors
- Have a high cash-based operation with low reported income
- Fail to report 1099 income
🛡️ How to Protect Your Business (and Your Sanity)
Whether or not audits are increasing, your best move is always the same: stay ready.
✅ 1. Keep Clean Books
Use a reliable bookkeeping system (like QuickBooks or Xero) and reconcile your accounts monthly.
✅ 2. Document Everything
Save receipts, invoices, and explanations for every expense you deduct.
✅ 3. File Accurately and On Time
Late or sloppy filings are red flags. File quarterly estimates if required.
✅ 4. Don’t Overstretch Write-Offs
If it’s not clearly ordinary and necessary for your business, think twice — and consult a pro.
✅ 5. Hire a Pro for Tax Season
Even if you DIY your books, a qualified CPA or EA can help you file confidently and catch issues before the IRS does.
🧾 Final Thoughts
So, is the IRS targeting small businesses more than ever?
Not exactly — but they are watching more closely than ever.
As tax enforcement ramps up across the board, small business owners need to be more diligent, more organized, and more proactive.
At The Profit Ledger, we’re here to help you build a business that’s not only profitable — but audit-proof.
You run the business. We’ll help you keep the IRS off your back.
The Profit Ledger 
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