Business Income-Related Red Flags (and How to Avoid Them with Ease)
No one wants a surprise letter from the IRS landing in their inbox.
Even if you’re doing your best to keep things honest and above board, there are a few common red flags that can accidentally trigger unwanted attention, especially when your income tracking is inconsistent or unclear.
Here are some of the most common income-related red flags we see and how to clean them up before they become a problem:
💸 Forgetting to include side or payment app income
Platforms like Stripe, PayPal, Venmo, and Square all report income to the IRS now. If you’re only counting what hits your main bank account, you might be leaving something out unintentionally.
🏦 Your bank deposits don’t match your actual sales
This can look like underreporting, when in reality, it’s often just a result of messy tracking. Whether you’re behind on reconciling or just not sure how to match up the numbers, this is fixable.
📉 Large deductions with low income
If your books show big expenses and minimal revenue, it might raise questions. Make sure your write-offs accurately reflect your real business activity (and aren’t just guesses at tax time).
📊 Income that fluctuates dramatically year to year
Sometimes that’s just business! But sudden dips or spikes in income can draw extra eyes. Clear documentation and organized financials help you explain those shifts confidently.
🔀 Mixing personal and business income
Blurring the lines between your business and personal finances can cause all sorts of confusion. If you’re moving funds between accounts or commingling income, it’s time to set clear boundaries (and clean systems).
📝 Inconsistencies across reports
Your bookkeeping records should match what’s filed on your taxes. Discrepancies between forms, spreadsheets, or software reports can lead to red flags, even if the actual numbers are right.
💵 Cash-heavy businesses without tracking systems
If you’re in an industry like beauty, retail, or hospitality, the IRS expects to see careful records. When cash is involved, documentation is key.
✨ Here’s the good news:
These issues are common—and completely solvable with a solid financial foundation.
That’s exactly what I’ll be teaching inside Financial Foundations for DIY CEOs, my brand-new group program for early-stage women entrepreneurs earning $75K and under.
If you're ready to get your business finances in order (without spreadsheets, guesswork, or shame), this is your sign.
Join the Priority List today to get early access, founding member pricing, and a powerful foundation to scale with confidence: