Sam Miles: How Can Entrepreneurs Avoid IRS Audits and Save on Taxes?

Martin Piskoric
Jan 14
4 min read

Updated: 7 days ago

CPA Sam Miles speaking during a podcast interview about tax planning strategies for entrepreneurs

What if the biggest tax deductions you’re missing have nothing to do with spending more money—and everything to do with how you tell the story?

That’s the core message CPA Sam Miles brings to this episode, drawing from decades of experience helping entrepreneurs, professionals, and business owners stay compliant while legally minimizing their tax burden. From first-generation founders navigating their first Schedule C, to seasoned professionals running seven-figure S Corps, Sam has seen one pattern repeat itself over and over: audits and IRS notices usually aren’t triggered by greed—they’re triggered by misunderstanding.

In a tax landscape increasingly shaped by AI, automated matching, and fewer human IRS agents, entrepreneurs can no longer afford to “figure it out later.” This conversation explores how knowing your numbers, documenting intent, and choosing the right entity structure can mean the difference between peace of mind and years of unnecessary stress.

Why Is the IRS Sending More Notices Than Ever?

The IRS isn’t hiring armies of new agents—but it is getting better at pattern recognition.

“They’re issuing more IRS notices than they’ve ever issued before with less IRS agents to handle the responses,” Sam explains.

Thanks to AI-powered matching systems, discrepancies between 1099s, W-2s, and reported income are flagged automatically. Something as simple as a missing 1099—perhaps sent to an old address—can trigger a matching audit.

What can entrepreneurs do right now?

Log into your IRS transcript.

Entrepreneurs often don’t realize they can access a full record of what’s been reported under their Social Security number or EIN. Reviewing transcripts helps you:

Confirm all income sources
Detect identity theft early
Avoid mismatched income audits

Reflection prompt:When was the last time you reviewed your IRS transcript—not your CPA?

What Makes an Expense Tax Deductible?

One of the most misunderstood ideas in entrepreneurship is the belief that spending money automatically creates deductions.

According to Sam, that’s backward.

“It’s not the spending of money that makes a tax deduction—it’s the context or the story in which we spent the money.”

The IRS allows deductions that are ordinary and necessary, but what qualifies varies widely by industry. A meal, a home office, or travel expense isn’t deductible unless it’s properly contextualized and documented.

Documentation isn’t optional anymore

For example:

Meals require notes on who you met with and what was discussed
Cash-heavy industries face additional scrutiny
Missing documentation almost guarantees a denied deduction in an audit

Key takeaway:If you can’t explain the business purpose six months later, neither can your CPA.

How Do CPAs “Read” Your Business Differently?

Numbers tell stories—if you know how to listen.

Sam trains his staff to look at tax returns and ask one question: What story happened this year?

Entrepreneurs often see effort and intent. CPAs see patterns, anomalies, and risk signals. When those two perspectives align, powerful insights emerge.

“Iron sharpens iron. You talk together, and you get a clearer picture of what’s really going on.”

Action step:Ask your CPA: What story do my numbers tell you this year?

What Is the Augusta Rule—and Is It Legal?

Yes. When done correctly.

The Augusta Rule allows homeowners to rent their personal residence to their business for up to 14 days per year, tax-free to the owner and deductible to the business—as long as it’s for a legitimate business purpose.

“You can rent your house to your business, pay yourself rent, and not pick it up as income—but documentation is everything.”

To qualify:

Market-rate rent must be justified
Business meetings must actually occur
Records must be prepared before, not after

This strategy is especially valuable for:

Owner-operators
Consultants
Professionals running S Corps or LLCs

Should You Be an S Corp—or Stay on Schedule C?

Entity structure isn’t about prestige—it’s about fit.

Many entrepreneurs assume forming an LLC or S Corp automatically saves taxes. In reality, it depends on:

Ownership structure
Role in the business
Income level
Reasonable compensation benchmarks

Sam explains that S Corps can reduce self-employment tax, but only when owners pay themselves fair wages.

“Little pigs are cute. Hogs get slaughtered.”

Paying yourself $12,000 on a $500,000 business will eventually trigger scrutiny. Paying yourself appropriately—and documenting why—holds up in audits.

A Story That Changed a Career

One of the most powerful moments in the episode comes from Sam’s early career, when a sales tax audit ballooned into a $56,000 assessment—until he challenged the methodology.

The auditor used a targeted sample, not a statistically valid one.