OBBB Audit Risk: IRS Scrutiny Intensifies for 2025–2026

The IRS is sharpening its focus on tax returns claiming benefits under the One Big Beautiful Bill, as expanded deductions and credits collide with stepped-up enforcement. For the 2025 and 2026 filing seasons, taxpayers using OBBB provisions face a higher likelihood of examination, particularly where claims are complex or high-value.

IRS Enforcement Shifts as OBBB Takes Effect

The One Big Beautiful Bill, enacted in July 2025, introduced sweeping tax law changes affecting individuals, businesses, and pass-through entities across the United States. While many provisions expanded deductions and credits, the IRS has made clear that enforcement will rise in parallel.

The agency’s 2025–2026 Priority Guidance Plan identifies multiple areas directly tied to OBBB, where additional regulations, notices, and compliance activities are planned. Historically, provisions flagged in the guidance plan tend to draw heightened attention during examinations, especially in their first years of implementation.

IRS officials have also reiterated a broader enforcement strategy aimed at higher-income taxpayers, partnerships, and large corporations. Returns that combine multiple OBBB benefits are more likely to be reviewed, particularly where documentation is incomplete or eligibility is unclear.

Deductions Under the Microscope in 2025 and 2026

Several OBBB provisions stand out as likely audit focal points due to their value, complexity, or novelty. Among the most closely watched are deductions for qualified business income, bonus depreciation, newly authorized wage-related deductions, and activity in opportunity zones or research programs.

Qualified Business Income Deduction Draws Renewed Attention

The law made the Qualified Business Income deduction permanent under Section 199A, preserving a potential 20 percent reduction in taxable income for eligible owners of pass-through businesses. The IRS has long scrutinized this deduction, and OBBB has not reduced that focus.

Audit issues often arise from how taxpayers classify their activities, particularly when a business may fall into a specified service trade or business category. Wage limitations, property basis calculations, and aggregation elections are also common sources of adjustment during audits.

For S corporations and partnerships filing Form 1120-S or Form 1065, inconsistent reporting between owners and the entity return can raise additional questions.

Bonus Depreciation Claims Require Precise Records

OBBB restored full bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. While this change offers immediate tax relief, it also places pressure on taxpayers to substantiate every element of the claim.

The IRS is expected to verify acquisition dates, placed-in-service timing, and business use percentages, especially for assets with mixed personal and business use. Related-party transactions are another frequent audit trigger, as certain purchases may be excluded under the Internal Revenue Code.

Taxpayers claiming both bonus depreciation and Section 179 expensing on the same assets should ensure the interaction of those provisions is correctly reflected on their tax returns.

New Tip and Overtime Deductions Create Early Audit Risk

OBBB introduced new deductions for qualified tips under the No Tax on Tips provision, with final IRS regulations published in April 2026 defining eligible occupations and the meaning of qualified tips. Because this provision is newly implemented, early filers may face closer review as the IRS establishes enforcement benchmarks.

The agency has indicated that occupation eligibility and substantiation will be central to compliance. To qualify for the deduction, tips must be reported on Form W-2, Form 1099-NEC, Form 1099-MISC, Form 1099-K, or on Form 4137 where applicable—estimates reconstructed at filing will not satisfy the reporting requirements. (Source)

Opportunity Zones and R&D Benefits Face Heightened Review

OBBB also expanded tax incentives for long-term investments and business innovation. The IRS has indicated that both areas will require strong supporting documentation and precise timing.

Opportunity Zones 2.0 and Timing Requirements

The updated Opportunity Zones framework expanded benefits while tightening reporting requirements. The IRS will closely review whether taxpayers meet the 180-day reinvestment deadline and whether substantial improvement thresholds are satisfied, particularly in rural zones.

Documentation supporting active business operations and valid fund self-certification is expected to be critical during examinations.

Research and Development Expenditures Under Revised Rules

OBBB eased certain capitalization requirements for research and development expenditures, but the IRS continues to examine whether claimed activities qualify under statutory definitions. Returns claiming research expenditures may be reviewed for consistency across tax records and financial disclosures.

Late elections, weak project documentation, or discrepancies between tax filings and accounting treatment can all increase audit exposure.

IRS Tools and Funding Support Expanded Enforcement

The IRS enters the 2025–2026 enforcement cycle with expanded tools and resources, despite partial funding reductions in recent years. Agency statements emphasize the use of data analytics to identify returns with elevated risk profiles.

IRS Chief Executive Officer Frank J. Bisignano has highlighted the agency's commitment to implementing the new tax law accurately and equitably, noting the wide variety of workers and business situations the new provisions affect. The agency continues to prioritize areas where tax law amendments have introduced new compliance challenges. 

Advanced audit tech allows the IRS to cross-reference multiple filings, increasing the likelihood that inconsistencies involving tax claims, business expenses, or pass-through income will be flagged.

Audit Risk Rises With Income and Complexity

Audit exposure under OBBB is not uniform. Lower-income filers claiming limited benefits may see only marginal increases in risk. However, higher-income taxpayers with layered deductions face a different reality.

Returns that combine qualified business income deductions, bonus depreciation, opportunity zone deferrals, and research credits carry greater examination risk simply due to complexity. Each additional provision introduces new documentation requirements and interaction rules, expanding the scope of potential review.

Tax advisors caution that even technically correct filings can become audit targets if records are incomplete or calculations are difficult to verify.

How Taxpayers Should Prepare Before Filing

Tax professionals increasingly recommend a documentation-first approach when claiming OBBB benefits. This includes maintaining purchase contracts, payroll records, usage logs, and contemporaneous business documentation well in advance of the filing deadline.

Taxpayers should also monitor IRS guidance releases throughout 2025 and 2026, as additional notices and instructions may clarify or narrow eligibility. Consulting experienced tax advisors before filing can help assess audit exposure and confirm that positions taken are defensible.

As enforcement ramps up, preparation—not aggressive interpretation—remains the most effective way to manage tax liability and reduce audit risk.

Sources

• IRS 2025–2026 Priority Guidance Plan (Notice 2025‑19)
• IRS Opportunity Zones Compliance Requirements

By William Mc Lee, Editor-in-Chief & Tax Expert—Get Tax Relief Now