The IRS has experienced significant workforce reductions and budget constraints in recent years. But the IRS continues to pursue enforcement in high-impact areas. This is particularly true for businesses with complex structures, pass-through entities, or cross-border activities. Advanced data analytics and AI help the agency target audits more efficiently, focusing on cases with the greatest revenue potential.

Businesses should track some of the below areas that recent enforcement campaigns have focused on:

• Transfer pricing compliance — Ongoing scrutiny for multinational operations to ensure arm’s-length pricing.
• Partnership reporting and basis adjustments — Increased focus on complex partnerships and potential abusive transactions.
• International information returns (e.g., Forms 5471, 5472, 8858, 8865, FBAR, etc.) — Strict enforcement of required cross-border reporting to combat offshore non-compliance, significant penalties can apply.
• Employee Retention Credit (ERC) claims — Continued audits and denials for improper or aggressive pandemic-era claims.

These priorities show the IRS’s strategy of deeper, tech-driven examinations on complex returns rather than broad increases in audit volume.

If any of the above areas may impact your business operations, be sure relevant documentation is organized and in proper form. Focus on contemporaneous transfer pricing studies, detailed partnership agreements, other intercompany agreements (service, licensing, IP, etc.), accurate and current organizational charts, and substantiation for any ERC positions. A bit of preparation can be critical if detailed IRS information requests arrive.

For professional guidance on IRS audit defense and compliance strategies, check out our resources here: IRS Audit Defense Help.

If your business is navigating complex tax reporting, cross-border compliance, or heightened IRS scrutiny, connect with DBL Law Partner Nick Eusanio for strategic guidance on audit readiness, defense, and proactive tax planning.