Want to avoid an IRS audit? Use these tips to stay under the IRS' radar.
The letter arrived on a Tuesday.
A bodybuilding coach we work with—let's call him Marcus—opened his mail to find an IRS notice. Not just any notice. An audit notice. They wanted to examine his last three years of tax returns.
Marcus felt sick. He'd reported everything honestly. Hadn't he? He'd tried to track expenses. Mostly. His home office deduction was legitimate. Probably. Those competition travel expenses were real business expenses. Right?
The audit took eight months to resolve. Marcus ultimately owed $0 in additional taxes because everything was legitimate and properly documented. But the stress, time, and professional fees cost him over $6,000 and countless hours he could have spent coaching clients.
The worst part? Marcus's audit was completely preventable. He'd triggered multiple red flags that we see fitness professionals trip over constantly at Fitness Taxes.
Here are the red flags you need to avoid.
What triggers it:
You report $65,000 in coaching revenue but deduct $72,000 in expenses, showing a $7,000 loss. You do this for three consecutive years.
The IRS has something called the "hobby loss rule." If your business shows losses for three out of five consecutive years, the IRS may reclassify it as a hobby rather than a legitimate business. Hobby expenses are no longer deductible after the Tax Cuts and Jobs Act of 2017.
Why fitness coaches fall into this:
New coaches starting out often legitimately lose money initially. They're buying equipment, paying for certifications, and building their client base. But you can't claim business losses indefinitely without eventually showing profit.
We see this frequently at Fitness Taxes with coaches who have full-time jobs and do fitness coaching on the side. They report their W-2 income from their day job, then report coaching losses year after year. The IRS views this skeptically—are you really trying to build a profitable business, or is this just an expensive hobby you're subsidizing with your day job?
How to avoid it:
Make sure your fitness business shows profit at least three out of every five years. If you're genuinely building a business and experiencing startup losses, maintain impeccable documentation showing business intent: business plans, marketing efforts, professional development, client acquisition strategies.
If you're doing online coaching as a side business while working full-time elsewhere, be especially careful. The IRS scrutinizes side businesses that consistently lose money, suspecting they're actually hobbies.
At Fitness Taxes, we help fitness professionals structure their businesses for long-term profitability while maximizing deductions during growth phases. We know how to document legitimate startup expenses and business-building activities so they withstand IRS scrutiny.
What triggers it:
You claim 50% of your 2,000-square-foot home as business space. You deduct $18,000 in home office expenses annually.
The IRS knows most home-based fitness coaches don't use half their house exclusively for business. Claiming disproportionately large home office deductions raises immediate questions.
Why fitness coaches fall into this:
You film content in your garage gym. You program workouts in your home office. You take client video calls from your living room. You think all of these spaces qualify.
They don't. The IRS requires "exclusive and regular use." Your bedroom where you sometimes answer emails doesn't count. Your kitchen table where you occasionally write programs doesn't qualify. Your garage gym that you also use for personal workouts doesn't pass the test.
One bodybuilding coach came to Fitness Taxes for a consultation after receiving an audit notice. He'd claimed 800 square feet of his 1,200-square-foot apartment as home office space—66% of his home. The IRS correctly identified this as unreasonable and audited three years of returns.
How to avoid it:
Be honest about your dedicated business space. A 10x10 home office (100 square feet) in a 1,500-square-foot home is 6.67% of your space. That's reasonable and defensible.
If you're claiming 30% or more, you'd better have the square footage measurements, photos, and business purpose documentation to back it up.
The simplified method ($5 per square foot up to 300 square feet) is safer from an audit perspective, though it often provides smaller deductions than the actual expense method.
At Fitness Taxes, we walk clients through proper home office documentation including measurements, photographs showing exclusive business use, and written explanations of business activities conducted in the space. When documented correctly, home office deductions are perfectly legitimate and don't trigger audits.
What triggers it:
You deduct $8,000 in meal expenses without documentation showing business purpose or 50% limitation.
Meals and entertainment expenses are generally 50% deductible for businesses. Deducting 100% signals either ignorance of tax rules or intentional fraud. Both get the IRS's attention.
Why fitness coaches fall into this:
You meet potential clients for coffee. You take successful clients to dinner to celebrate their transformations. You attend fitness industry dinners and networking events. These all feel fully business-related.
But the IRS limits business meal deductions to 50% specifically because meals always have a personal element—everyone needs to eat regardless of business discussions.
How to avoid it:
Deduct 50% of business meals. Period. Keep receipts showing who attended and the business purpose. "Met with Sarah Johnson to discuss 12-week powerlifting programming" is sufficient documentation.
Track these expenses properly with dates, amounts, attendees, and business purpose. At Fitness Taxes, we ensure fitness professionals categorize meal expenses correctly at 50% deductibility. Our bookkeeping systems automatically apply the 50% limitation so you never accidentally claim 100%.
A CrossFit gym owner we worked with had been deducting 100% of all meals because "I only eat out when I'm meeting with clients or potential clients." After we explained the 50% rule, we amended his return to correct the error before the IRS caught it, saving him from audit penalties.
What triggers it:
You claim 100% business use of your Toyota 4Runner. You deduct every mile driven, every gas purchase, every oil change.
Unless you have multiple vehicles and use one exclusively for business (never driving it for groceries, personal errands, or commuting), the IRS knows you're using your vehicle personally too.
Why fitness coaches fall into this:
You drive to clients' home gyms. You travel to gyms where you train clients. Every trip feels business-related, so you categorize everything as business miles.
But your morning drive to your regular gym where you train clients? That's commuting, not deductible. Your weekend drive to Target where you happen to pick up resistance bands? Partially personal.
How to avoid it:
Be realistic about business versus personal use. Most fitness professionals legitimately use vehicles 40-70% for business. That's defensible with proper mileage logs.
Use GPS-based tracking apps that automatically log trips. Categorize honestly. The IRS respects consistent, reasonable business use percentages backed by detailed logs.
According to IRS guidelines on vehicle expenses, contemporaneous mileage logs are required. "I drove about 15,000 miles for business" estimated in April won't survive an audit.
At Fitness Taxes, we help coaches set up automatic GPS mileage tracking and establish reasonable business-use percentages based on their actual driving patterns. One coach we worked with was claiming 100% business use of his only vehicle. We reviewed his actual trips and determined 62% was legitimate business use—still a substantial deduction ($5,270 annually), but defensible in an audit.
What triggers it:
Your tax return shows exactly $15,000 in equipment expenses. Exactly $8,000 in travel expenses. Exactly $5,000 in continuing education.
Real business expenses are messy. They're $14,873.42 and $7,644.19. Rounded numbers scream "estimate" or "guess," and the IRS knows estimates don't equal documentation.
Why fitness coaches fall into this:
You lost receipts. You forgot to track expenses throughout the year. Come tax time, you remember buying "about $3,000 worth of equipment" and plug in $3,000.
This is incredibly common. We see it constantly when new clients come to Fitness Taxes from self-preparation or generic accountants. Their prior returns are full of suspiciously round numbers that represent guesses rather than actual documented expenses.
How to avoid it:
Track expenses throughout the year using accounting software. Every expense should reflect the actual amount spent, down to the cent.
If you genuinely don't remember an expense, you can't legally deduct it. "I know I spent money on this" isn't documentation.
This is exactly why professional bookkeeping services matter. At Fitness Taxes, we ensure every expense is recorded accurately with proper documentation as it occurs, not estimated months later.
When we see rounded numbers on prior returns during new client consultations, we know there's a problem. Either the coach guessed at expenses (losing legitimate deductions for amounts they actually spent), or they rounded up estimates (risking audit problems if they can't substantiate the deductions).
What triggers it:
You report $12,000 in cash expenses for equipment, training supplies, and facility fees.
The IRS is highly skeptical of large cash deductions because cash is untraceable. Cash expenses are easy to inflate or fabricate, and the IRS knows this.
Why fitness coaches fall into this:
Some gym owners prefer cash for day passes. Some competition entry fees are cash-only. Some equipment suppliers at fitness expos only take cash.
These are legitimate expenses, but without receipts, they're unverifiable.
How to avoid it:
Use credit cards or checks for business expenses whenever possible. They create automatic documentation trails.
When you must pay cash, get detailed receipts immediately. Note the business purpose on the receipt before you forget. Photograph receipts and store digitally.
If you're legitimately spending thousands in cash monthly, maintain a cash disbursements journal showing date, amount, payee, and business purpose for every expense.
A powerlifting coach we worked with at Fitness Taxes competed frequently and always paid cash entry fees at local meets. Over a year, this represented $2,400 in legitimate deductions. We helped him implement a system: photograph the entry form showing the fee, photograph the receipt, and immediately log it in his accounting software. Now he captures 100% of these cash expenses with proper documentation.
What triggers it:
You deduct $2,400 annually for multiple gym memberships without documentation showing business purpose versus personal fitness.
The IRS knows fitness professionals need to stay fit. But your personal workout isn't a business expense just because you're a coach.
Why fitness coaches fall into this:
You maintain memberships at three different gyms to train clients, research equipment, and network with potential clients. This is legitimate.
But you also use these gyms for your own personal training. That portion isn't deductible.
How to avoid it:
Document the business purpose of each membership. "Membership at Iron Paradise Gym where I train 8 clients weekly and conduct facility research" is defensible. "Membership where I work out" is not.
If you use the gym 70% for business (training clients) and 30% personally (your own workouts), deduct 70%. Be honest.
Maintain client schedules and training logs showing your business use of facilities.
At Fitness Taxes, we help coaches document gym memberships properly. One online coach maintained memberships at four different gyms to film content showing various equipment setups for his programming app. We documented the business purpose (content creation for business), kept video logs showing filming sessions, and successfully defended the full deduction of all four memberships.
What triggers it:
Your business checking account shows mortgage payments, grocery purchases, and kids' school tuition mixed with legitimate business expenses.
The IRS sees this as either poor recordkeeping (suggesting other problems) or potential personal expense deductions disguised as business expenses.
Why fitness coaches fall into this:
You're busy. One checking account seems simpler. You tell yourself you'll sort out business versus personal later.
You won't. And come tax time, it's nearly impossible to accurately categorize transactions from six months ago.
How to avoid it:
Open dedicated business accounts and credit cards. Use them exclusively for business. Make this change today if you haven't already.
If you've commingled funds, stop immediately and start fresh. Going forward, maintain clean separation between business and personal finances.
At Fitness Taxes, separating business and personal finances is literally the first thing we address when working with new fitness coaching clients. We've seen too many audit cases where commingled funds created problems even when the coach had legitimate expenses.
Our parent company, Asnani CPA, has handled numerous IRS audits over the years, and commingled accounts consistently make audits more difficult and expensive to resolve. Even with receipts and documentation, proving business purpose becomes harder when personal and business expenses are mixed.
What triggers it:
You receive $35,000 through Venmo from coaching clients but report only $18,000 on your tax return.
Starting in 2024, payment platforms report transactions exceeding $5,000 to the IRS (this threshold was originally set to be $600 but was delayed). They know you received the money. When your tax return doesn't match, red flags go up immediately.
Why fitness coaches fall into this:
You forgot about some Venmo payments. You thought small transactions didn't count. You assumed cash app payments were somehow under the radar.
This is becoming a huge issue in the fitness industry. Many coaches receive payments through Venmo, CashApp, PayPal, and Zelle because clients find these platforms convenient. But coaches don't always realize these platforms now report to the IRS.
How to avoid it:
Report all income. All of it. Every Venmo payment, every cash payment, every barter exchange, every client who paid you anything.
Maintain detailed income records. Don't wait for 1099-K forms to arrive. Track income contemporaneously using accounting software.
At Fitness Taxes, we help coaches implement income tracking systems that capture every payment regardless of method. We reconcile payment platform statements against accounting software to ensure nothing is missed.
A bodybuilding coach came to us after receiving an IRS notice. He'd reported $42,000 in income but received $68,000 through various payment platforms. He thought some platforms "didn't count" or that small payments weren't taxable. Wrong. He owed back taxes, penalties, and interest totaling over $11,000. This was completely preventable with proper income tracking.
What triggers it:
You report a $15,000 business loss on your tax return while simultaneously posting Instagram stories about your new BMW, luxury vacations, and expensive dinners.
IRS auditors do look at social media when investigating taxpayers. If your claimed income doesn't support your visible lifestyle, they'll dig deeper to find unreported income or fraudulent deductions.
Why fitness coaches fall into this:
Social media is marketing. You're building your brand as a successful coach. You need to look successful to attract high-paying clients.
But if you're claiming poverty on tax returns while flaunting wealth online, that's a massive red flag.
This is a particular challenge in the fitness industry where social media presence is critical for business success. You need to showcase results, lifestyle, and success to attract clients. But you also need to be honest on tax returns.
How to avoid it:
Be consistent. If you're legitimately earning well and affording a nice lifestyle, pay your taxes on that income. If you're struggling financially, don't pretend otherwise on social media.
Remember that anything public can be discovered during an audit. Your social media posts are public statements about your financial situation.
At Fitness Taxes, we counsel clients on this exact issue. You can absolutely showcase success and market effectively while also being honest on tax returns. The key is making sure your reported income actually reflects the lifestyle you're displaying.
One fitness influencer we worked with was posting about "building her empire" and showing luxury purchases while reporting $35,000 in annual income. We explained that her social media presence was creating audit risk. She either needed to tone down the luxury content or acknowledge that her actual income (once we properly tracked everything) was around $95,000, not $35,000. She chose the latter, paid her proper taxes, and continues successfully marketing on social media without audit risk.
If you do get audited, here's what to expect:
The IRS will request documentation for specific deductions. They'll want receipts, mileage logs, home office measurements, business purpose explanations, bank statements, and client lists.
If you have proper documentation, audits are merely inconvenient. If you don't, you'll owe back taxes, penalties (20-40% of underpayment), and interest.
Professional representation matters immensely. When Fitness Taxes represents clients in audits, we handle all communication with the IRS, organize documentation, and advocate for clients' positions. Most fitness professionals don't know tax law well enough to defend their own deductions.
Marcus, the bodybuilding coach from the opening story, hired us to represent him in his audit. We organized three years of receipts, created detailed mileage logs from his GPS app data, documented his home office space with photos and measurements, and prepared written explanations of every questioned deduction.
The audit took eight months, but Marcus owed $0 in additional taxes. Everything was legitimate and properly documented. Without professional representation, he likely would have panicked and agreed to disallow legitimate deductions just to make the audit go away.
Here's what audit-proof fitness businesses do:
At Fitness Taxes, we provide comprehensive tax preparation and planning specifically for fitness professionals. Our clients making $40,000 to $200,000 annually typically save $4,000 to $15,000 in taxes while maintaining audit-proof documentation.
We understand the fitness industry inside and out. We know which deductions are legitimate for powerlifting coaches, what travel expenses are reasonable for bodybuilding professionals, and how gym owners should structure their businesses for maximum tax efficiency.
We've helped clients through IRS audits, correspondence examinations, and penalty abatement requests. We know what documentation the IRS wants to see and how to present it effectively.
If you're worried you've triggered any of these red flags:
Don't wait for an audit letter to arrive. Be proactive about audit prevention by maintaining proper documentation and working with CPAs who understand your specific business model.
Procrastination leads to OVERPAID TAXES and audit risk. We see coaches who ignored warning signs for years, then faced expensive audits that could have been prevented with proper planning.
Contact Fitness Taxes for a comprehensive tax review. We'll identify potential audit triggers in your current situation and implement systems to protect you going forward.
Remember: the goal isn't to avoid taking legitimate deductions. The goal is taking every deduction you're entitled to while maintaining documentation that proves they're legitimate.
Fitness coaching is your passion and expertise. Tax strategy and audit protection is ours. Let's work together to make sure you're keeping more of what you earn without losing sleep over potential IRS problems.
Schedule your tax analysis today.
We specialize exclusively in fitness professionals—powerlifting coaches, bodybuilding competitors, CrossFit gym owners, online trainers, and group fitness instructors. Our parent company, Asnani CPA, brings decades of accounting expertise, and Fitness Taxes applies that knowledge specifically to your industry.
NOBODY knows taxes and the online fitness coaching industry better than we do. We'll help you reduce your taxes, handle all the accounting, and maximize all the potential tax deductions that often go missed—all while keeping you audit-proof and compliant.
Stop worrying about IRS red flags. Start working with CPAs who know exactly how to navigate fitness industry tax challenges. Contact us now.
