2026 Dirty Dozen

The dirty dozen, what IRS is looking for

These are the issues that IRS considers of most concern. They are looking at your records or lack of inclusion in your return about these 12 front of their mind points and issues.

Here are 12 items the IRS is looking for and focusing on in 2026:

1. Un-reported and under-reporting of Income:
   The IRS has ongoing initiatives targeting individuals with high incomes and wealth who have failed to file returns or engaged in abusive tax avoidance schemes.
2. Large Corporations:
   The IRS continues deep audits of large businesses and multinational corporations, focusing on complex issues like transfer pricing and other international tax matters.
3. Complex Partnerships and Pass-Through Entities:
   The IRS is increasing its focus on large, complex partnerships, which represent a disproportionate share of uncollected taxes, by utilizing specialized compliance units and advanced data analytics.
4. Abusive Tax Schemes:
   The IRS continues to target known abusive tax shelters, such as syndicated conservation easements and micro-captive insurance arrangements, and is pursuing promoters of these schemes.
5. Employee Retention Credits (ERC) Misclaims:
   The IRS is focused on finalizing the processing of legitimate ERC claims while aggressively penalizing promoters of erroneous claims. The statute of limitations has been extended to help IRS continue to find and prosecute the promoters or ERC Credits for businesses that did not quality. The problem these promoters are having is that there television and radio ads say: If you CPA said you don’t qualify for the ERC Credit, then come to us we will be sure your request goes through!
6. Unreported Gig Economy Income:
   With enhanced third-party reporting via Forms 1099-K, the IRS is better able to identify and address underreported income from the gig economy and other side hustles. IRS is using many tactics to find and identify unreported gig income. They may look at the number of miles you drove your car then interpolate that into plausible income for you.
7. Foreign Accounts and Assets:
   Proper reporting of foreign financial accounts and assets remains a key compliance area, with the IRS actively pursuing individuals who use offshore accounts to hide income. Also, offshore real estate holdings need to be reported. Some are overlooking cultural practices where the parents include the working in the US son or daughter as a co-signer on the parent’s bank accounts which mandates the son or daughter to report.
8. False Tax Credits:
   The IRS continues to watch for claims for false or outdated credits, such as the Fuel Tax Credit, for which most individual taxpayers do not qualify.
9. Use of Advanced Data Analytics and AI:
   The IRS is deploying advanced technology to analyze large amounts of data to better detect patterns of non-compliance and select high-risk cases for audit more efficiently. This could be quite shocking and scary for the general public.
10. Unethical Tax Return Preparers:
    The IRS is working to strengthen oversight of “ghost” preparers and other unethical individuals who knowingly prepare false returns for their clients.