For many small business owners, when tax season comes it brings a mix of pressure and strategy. You’re not just trying to stay compliant; you’re trying to be smart about what your business spent over the year and what makes sense to deduct to reduce your taxable income. Deductions can ease the tax burden when used correctly. But pushing too far can cause bigger problems than the savings are worth.

Exaggerated or poorly documented deductions often land business owners in the middle of an IRS audit. And once that process begins, it can take time and focus away from running your business. Understanding which deductions tend to raise flags can help you avoid unnecessary scrutiny and stay in control of your financial picture.

Business Deductions Must Be Ordinary or Necessary

The IRS won’t just accept any deduction that is seemingly related to your business. The law requires that deductions meet two key standards: they must be both ordinary in your line of work and necessary for the business to function or improve.

Trying to write off costs that fall outside those lines can put your return at risk. In many cases, the business owner may feel a purchase is justified, but without meeting the IRS’s criteria, that deduction won’t hold up. Even when the expense is legitimate, miscategorizing it or overstating the amount can draw attention.

It’s important to treat deductions as tools, not loopholes. Any expense you claim should have clear documentation and a direct connection to the business’s operations.

Should You Write Off the Business Use of a Personal Vehicle?

One area where people often get into trouble is deducting vehicle use and travel. If you’re using a personal car for work, you can usually claim some of the related costs. That said, the IRS has specific rules about how to do it, and those rules are tightly enforced.

You can choose to calculate your deduction based on the actual costs of operating the vehicle or use the standard mileage rate set each year. Whichever method you pick, documentation is key. If you’re using mileage, you’ll need a consistent log that tracks every business-related trip.

Whether you use a notebook or a tracking app, that log needs to be detailed and up-to-date. Ballpark guesses or recreated estimates don’t count. Vehicle deductions are often challenged not because the use wasn’t valid, but because the records were incomplete or missing altogether.

Other Business Deductions That Often Trigger an Audit

Some write-offs draw more attention than others. Charitable donations are one example, especially when they seem unusually large compared to the business’s revenue. While generosity is a good thing, the IRS expects clear records (receipts, acknowledgment letters, and documentation) that support the amounts listed.

Businesses that regularly deal in cash can also find themselves under closer watch. The reason is simple: it’s harder to track. Without a clean record of sales and expenses, the IRS may question whether income has been underreported or deductions overstated.

Another issue is inconsistency. If your deductions suddenly increase from the year before, without an obvious reason, be ready to explain. For example, if your travel costs or supply purchases doubled this year, the IRS may ask why. A reasonable explanation paired with receipts will usually resolve the matter, but without that support, an audit becomes more likely.

Other deductions that commonly trigger a second look include:

  • Meals and entertainment expenses, especially since some of these are no longer deductible under current law.
  • Home office deductions without clear separation between work and living space.
  • Payments made to freelancers or contractors that lack proper IRS reporting, such as Form 1099-NEC.

You don’t need to fear deductions—just respect them. Keeping your records tight and your reasoning sound is your best defense against an audit.

Stay Out of Trouble with the IRS

If your business has claimed deductions that might raise questions, now is the time to take proactive steps to either prepare for or prevent an audit. We help Washington business owners reduce their risk and resolve tax disputes before they become larger issues. Let’s protect what you’ve worked hard to build. Contact Robert V. Boeshaar, Attorney at Law to get the legal solutions necessary for your business to correct errors, respond to an audit, or prepare for future returns.

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