Preparing for Audit Season in 2026: What Texans Should Have Ready

It's that time of year again, tax time. For many Texans, whether you’re a business owner, accountant, homeowner, or individual taxpayer, “audit season” can feel like a looming storm cloud. But it doesn’t have to be daunting. At Powell Tax Law, we help businesses and individuals tackle IRS challenges such as unpaid taxes, wage levies, tax levies, and audits. With 2026’s audit season on the horizon, now is the time to be proactive and confident in your tax posture.

Think of this blog as a friendly but professional roadmap to get ready for anything the Internal Revenue Service (IRS) may throw your way, especially here in Texas. We’ll walk through three core areas you should focus on: how the audit landscape is changing, what the IRS is looking for, and practical steps you can take now.

Changing Audit Landscape: Why 2026 Matters 

The audit environment isn’t static. The IRS is shifting its focus, and that means Texans should pay attention.

Did you know? According to the Milikowsky Tax Law, by 2026, the IRS is expected to significantly ramp up audit activity across the board. High-income individuals will see audit rates rise from 11% to 16.5%, while large corporations could face nearly three times as many audits as before, jumping from 8.8% in 2019 to an estimated 22.6%. These trends signal a clear shift toward more aggressive enforcement, especially for complex or high-dollar tax filings.

These numbers don’t necessarily mean the average Texan filing a standard return will automatically be audited, but they do signal a shift in priorities. Much of the new focus is on “high-wealth individuals,” large corporations, and complex partnerships.

Why this matters for Texans:

• If you run a business or are in a high-income bracket, the risk of scrutiny is increasing.
• Even if you’re a homeowner or individual taxpayer, the standards are rising: documentation, record-keeping, and compliance matter more than ever.
• The mindset should shift from “Let’s just hope I’m not audited” to “Let’s be ready if I am.”

What the IRS Will Be Looking For – Preparation Matters 

Once you understand why the audit season in 2026 deserves your attention, the next step is understanding what the IRS will be looking for and how you can prepare.

Record-keeping and documentation 

Nolo states that one of the most common audit triggers is a lack of clear documentation. For example, if you claim large deductions, business expenses, claim a business loss, or do not report all of your income without solid backup, you become a higher-risk target.

Large, complex entities or transactions 

MIZE says the IRS is especially focused on complex partnerships, large corporations, transactions across entities, foreign assets, and high-income individuals. Even if you’re a smaller business, if you have a partnership structure, many entities or related-party transactions, you should pay attention.

Consistency and accuracy in income reporting 

Making sure your income, deductions, and credits are correctly reported is critical, not only to stay off the radar but to be ready if you get a notice.

Did you know? Thorn Law Group reports that the IRS conducted over 505,514 audits in FY 2024, including 393,783 correspondence audits and 111,713 field audits. That tells us: most audits are correspondence (a letter asking for info), but field audits (in-person or on-site) still account for the majority of additional tax assessed. That means if you get the letter, you want to be ready.

Practical Steps for Texans to Prepare 

Now let’s move from “what’s happening” to “what you should do.” Here are actionable steps you as a business owner, CEO, accountant, homeowner or individual taxpayer in Texas, can take to be audit-ready for 2026.

Step 1 – Organize and maintain your documentation

• For business owners: keep a clearly labeled and regularly reconciled ledger of income, expenses, vendor invoices, payroll records, and related-party transactions.
• For homeowners/individuals: save records for mortgage interest, property taxes, home-office deduction (if applicable), rental property income, and expenses.
• Make sure your digital files are backed up and logically organized (by year, type of documentation, etc.).
• If something is unusual (a large deduction, an irregular transaction), include a short narrative/explanation for it.

Step 2 – Review prior returns and tax positions

• Take time now to review your last 2-3 years of tax returns with your accountant or tax attorney. Are there positions you would defend if challenged?
• If you used aggressive deductions, credits, or business structures, be ready to explain your rationale and have supporting documentation.
• Verify that your tax professional is reputable (for example, they should have a valid Preparer Tax ID Number (PTIN))

Step 3 – Structure your business and personal affairs for clarity

• If your business has multiple entities, make sure each entity’s purpose, structure, and transactions are well documented.
• If you own property in Texas or have rental income, be clear about your rental vs personal use, fair-market value, expense allocation, etc.
• If you use home-office or other deductions, verify that you meet the applicable rules and can support them with evidence.

Step 4 – Plan for the possibility of interacting with the IRS

• Know the difference between a correspondence audit (letter asking for documents) and a field audit (on-site or in-person exam).
• If you get an audit notice, respond promptly and consult with a tax attorney. The earlier you engage with someone experienced, the better your outcomes.
• Maintain open communication with your tax-advisor team and keep them informed of any changes in your business or personal tax situation.

Step 5 – Don’t wait until the audit is on your door

Getting ahead now reduces stress later. Audit season isn’t just about being audited; it's about being ready for the possibility, having peace of mind, and avoiding last-minute scrambling.

Get Ahead Now

Audit season in 2026 is shaping up to demand more preparation from both the IRS and taxpayers. The agency is increasing scrutiny on high-wealth individuals, large corporations, and complex financial structures.

No matter your situation, maintaining clear documentation, accurate reporting, and thoughtful tax planning is key. Texans can take simple, proactive steps now: organize records, review past returns, and prepare for the possibility of an audit, to avoid stress later.

If you’d like professional guidance navigating your tax challenges or getting audit-ready for 2026, contact Powell Tax Law. Being proactive is the best defense against an unexpected IRS audit.