What I Learned Working Inside the IRS: A Former IRS Agent’s Perspective for 2026
- Lauren Twitchell
- Dec 15, 2025
- 5 min read
For four years, I worked inside the IRS.
Not as a phone rep. Not as a temp. Not as someone reading from a script.
I was a Revenue Agent. The person on the other side of the audit letter. The person reviewing bank statements, returns, receipts, and explanations. The person trained to follow the Internal Revenue Manual, apply federal tax law, and determine whether a return was correct—or not.
And here’s the truth most people don’t expect to hear:
The IRS is not nearly as mysterious, omnipotent, or vindictive as it feels from the outside.But it is far more procedural, documentation-driven, and unforgiving of sloppiness than most small business owners realize.
As we head into 2026, with enforcement continuing to normalize after years of pandemic disruption, I want to share what I learned from the inside—especially for small business owners, Etsy sellers, solopreneurs, and anyone who files a Schedule C and hopes for the best.
This isn’t fear-mongering.
This isn’t legal or tax advice.
This is perspective.
1. Most Audits Aren’t Personal—But They Are Thorough
One of the biggest misconceptions about the IRS is that audits are personal.
They aren’t.
Cases are assigned based on systems, filters, and workload balancing. Agents don’t pick you because they “don’t like” your industry, your politics, or your personality. Most of the time, they don’t know anything about you when the case lands on their desk.
What is personal is how your records hold up once the examination begins.
From the inside, audits are checklist-driven. Agents are trained to:
Verify income
Substantiate deductions
Reconcile discrepancies
Follow issues where documentation doesn’t support the return
If your books are clean, organized, and logical, the audit often stays narrow.
If your records are chaotic, incomplete, or contradictory, the audit expands—not out of malice, but necessity.
Messy books create questions.Questions create issues.Issues create time.
2. The IRS Cares Less About “Intent” Than People Think
This one surprises a lot of business owners.
Inside the IRS, agents are not mind-readers. They don’t spend time speculating about whether you meant to do something wrong. They focus on whether the return is correct under the law.
Good intent does not replace documentation.
You can be honest, hardworking, and trying your best—and still have adjustments made if:
Income is understated
Deductions aren’t substantiated
Personal and business funds are mixed
Records don’t tie out to the return
From the IRS perspective, the return either meets requirements or it doesn’t. Emotion rarely enters the equation.
That’s why “I didn’t know” is not a defense—and why education and systems matter far more than vibes.
3. Bookkeeping Is the Silent Backbone of Compliance
If I could tattoo one sentence on every small business owner’s forehead, it would be this:
Your bookkeeping is your first line of audit defense.
Not your tax preparer.
Not your CPA.
Not your ability to explain things verbally.
Your records.
Inside the IRS, agents are trained to rely on documentation over explanations. Clean bookkeeping does three powerful things:
It supports the numbers on your return
It limits the scope of questioning
It builds credibility early in the exam
Sloppy or nonexistent bookkeeping does the opposite. It forces the agent to reconstruct your business using bank statements, third-party reports, and assumptions—none of which favor you.
By 2026, with more digital reporting and cross-checks in place, weak bookkeeping will stand out faster than ever.
4. The IRS Doesn’t Expect Perfection—But It Expects Effort
Contrary to popular belief, the IRS does not expect small business owners to be perfect.
What they expect is:
Reasonable systems
Consistent practices
Good-faith effort to comply
Mistakes happen. Agents know that. Returns can be amended. Issues can be corrected.
What raises red flags is:
No system at all
Years of untracked activity
Commingled personal and business spending
“Recreated” records that don’t make sense
From the inside, there’s a noticeable difference between someone who made errors and someone who never tried to get it right.
That distinction matters more than most people realize.
5. Fear Is More Dangerous Than Noncompliance
One of the saddest patterns I saw inside the IRS was how fear paralyzed people.
People ignored notices because they were scared.
They avoided opening mail.
They delayed fixing problems until they snowballed.
They didn’t ask for help because they assumed the worst.
Fear leads to inaction—and inaction almost always makes things worse.
The IRS operates on timelines. Notices have response periods. Examinations follow procedures.
Silence doesn’t stop the process—it just removes your voice from it.
From the inside, cooperative taxpayers with decent records were almost always easier to work with than terrified ones who froze.
6. Small Businesses Are Not the “Enemy”—But They Are Scrutinized
There’s a narrative that the IRS is “coming for small businesses.”
The reality is more nuanced.
Small businesses are scrutinized because:
They are complex
They are prone to errors
They involve judgment calls
They rely heavily on self-reporting
That doesn’t make them villains. It makes them risk-based.
In 2026, expect continued focus on:
Schedule C filers
Cash-heavy businesses
Online sellers and gig income
Expense deductions that don’t match income levels
This doesn’t mean panic. It means preparation.
7. Audit Readiness Is a Lifestyle, Not a Crisis Response
One of the biggest lessons I learned inside the IRS is that audit readiness isn’t something you scramble for after a letter arrives.
It’s something you build quietly over time.
Audit-ready businesses:
Keep separate accounts
Track income accurately
Categorize expenses consistently
Save receipts and statements
Reconcile regularly
Understand their numbers
They don’t live in fear. They live in clarity.
And when something does happen—a notice, an exam, a question—they’re not starting from zero.
8. The IRS Is Changing—But Fundamentals Still Matter
Technology is changing the IRS. Reporting is expanding. Automation is increasing.
But the fundamentals have not changed:
Income must be reported
Deductions must be substantiated
Records must support returns
Consistency matters
In 2026 and beyond, the gap between businesses with systems and businesses without them will widen.
This is where education—not panic—becomes your greatest asset.
Final Thoughts: What I Want You to Know Going Into 2026
Having worked inside the IRS, here’s what I want small business owners to understand most:
You are not powerless.
You are not expected to know everything.
You are not doomed because you made mistakes.
But you are responsible for your records.
Bookkeeping isn’t busywork. It’s protection.
Clarity isn’t optional. It’s leverage.
And understanding how the IRS thinks is one of the most empowering tools you can have.
At Zero Fluff Books, this perspective is exactly why we exist—to strip away fear, replace it with facts, and help business owners build systems that actually hold up.
Because compliance shouldn’t feel like a mystery.And bookkeeping shouldn’t feel like a gamble.
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