The IRS enters 2026 with enhanced enforcement capabilities funded by the Inflation Reduction Act and sharpened by technological investments in data analytics and artificial intelligence. Business owners should understand the agency's enforcement priorities to ensure compliance and reduce audit risk. The areas of focus for 2026 reflect both longstanding IRS concerns and new initiatives enabled by the increased resources.

Large Partnerships

The IRS has made large partnership examinations a top priority, announcing specific targets for partnerships with assets exceeding $10 million. The centralized partnership audit regime—which went into effect for tax years beginning after 2017—gives the IRS a more efficient mechanism for auditing partnerships, and the agency has been investing in the specialized expertise needed to examine complex partnership transactions. Business owners with interests in large partnerships should ensure that their K-1 reporting is accurate and that the partnership's positions are well-documented and defensible.^[1]

High-Income Individual Compliance

The IRS has announced increased scrutiny of individual returns reporting income above $1 million, with a particular focus on unreported income, aggressive deduction claims, and noncompliance with estimated tax requirements. The agency's data analytics capabilities now enable more sophisticated matching of information returns (1099s, K-1s, and other third-party reports) with individual returns, making it more difficult to underreport income without detection.^[2]

Digital Assets and Cryptocurrency

Cryptocurrency and digital asset reporting remains a significant enforcement focus. New reporting requirements for digital asset brokers are phasing in, and the IRS has been sending compliance letters to taxpayers who may have unreported digital asset transactions. The agency has invested in blockchain analytics tools that allow it to trace cryptocurrency transactions and identify potential non-compliance. Business owners who received, sold, or exchanged digital assets should ensure accurate reporting on their returns.^[3]

Employee Retention Credit

The IRS continues to pursue enforcement actions related to fraudulent or excessive Employee Retention Credit claims. The agency has identified widespread abuse of the ERC, particularly claims promoted by third-party promoters with little regard for eligibility requirements. Business owners who claimed the ERC should review their claims for accuracy and be prepared to substantiate their eligibility if audited. Voluntary disclosure programs may be available for taxpayers who received credits to which they were not entitled.^[4]

Protecting Yourself

The best defense against an IRS enforcement action is proactive compliance: accurate reporting, thorough documentation, timely filing and payment, and the willingness to seek professional guidance when issues are complex. Business owners who receive correspondence from the IRS should respond promptly and should consider engaging a tax controversy professional early in the process—the decisions made in the initial stages of an examination can significantly affect the outcome.^[5]