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Key Takeaways High-income taxpayers filing Schedule C or claiming aggressive deductions are prime audit targets, so staying accurate and consistent is essential.
Keeping impeccable records, reporting the right residency and avoiding high-risk strategies can dramatically lower your audit risk.
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.
As the CEO of Dimov Tax, I see audit notices every day. From our experience working with thousands of clients, my team and I have identified clear patterns. If you are a high-earning business owner or leader, here are the primary triggers to avoid and strategies to reduce your audit risk.
If you file Schedule C, expect higher scrutiny
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-review expense categories
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