How do you avoid IRS audits as an entrepreneur?

Inside this conversation

Sam Miles is a CPA, and we spoke about how entrepreneurs can legally reduce taxes while avoiding the small, preventable mistakes that trigger IRS audits. Drawing on years of audit defense and advisory work, Sam explains why “it’s not the spending of money that makes a tax deduction, it’s the context or the story,” and why documentation—not clever tricks—is what actually protects you as the IRS gets better at AI-driven matching.

We also talked about where most entrepreneurs get into trouble: unreported 1099 income, poor documentation, and not knowing their own numbers. Sam urges business owners to actively review their IRS transcripts, reminding listeners that “nobody knows your numbers like you do,” and that missing income is “the most common, easiest way to get audited.” He shares how CPAs read tax returns as stories—and why pushing your CPA to explain that story can reveal risks early.

Sam’s approach is grounded in ethics and realism. He breaks down practical tools like reasonable compensation, entity structure decisions, and why some popular strategies backfire when abused. As he puts it, “little pigs are cute, but hogs, they get slaughtered,” a reminder that aggressive shortcuts often cost more in time, stress, and money later. The episode closes with a clear message: do it right, document it properly, and use the rules as written.

Key takeaways

• Missing 1099 income is the fastest path to an IRS audit
• Check your IRS transcript to verify all reported income
• Deductions depend on business context, not just spending
• Documentation must be done before, not after, tax filings
• Reasonable compensation protects S-corp owners in audits
• CPAs read tax returns as stories—ask them to explain yours

Episode description from the official 21CE podcast feed. This text is the show notes, not a full transcript.