The CompDefend measure
What is the Federal Tax Defensibility Index?
The Federal Tax Defensibility Index (FTDI) is CompDefend’s 0–100 measure of how well your business’s applicable federal tax posture appears supported, based on the information and verified signals available to CompDefend. A higher number means the parts of the picture that could be seen look better supported. It is not an audit probability, an IRS score, or a prediction that an examination will occur. The result pairs the score with a separate confidence figure that says how much of the full picture the score was built from, so you can tell the difference between a position that looks well supported and one that is simply unseen.
The FTDI in brief
- The index is a 0–100 measure of how well the applicable federal tax posture appears supported by information and verified signals available to CompDefend — not the odds that the IRS will examine you.
- Score and confidence are separate. The score is the position; the confidence figure is how much of the picture could be seen.
- Missing information never makes a business look safer. It earns no points and lowers confidence, because an unseen fact is not evidence.
- The result names the posture areas that apply to your business and which ones look weak, so the number has something concrete underneath it.
- The index is not an IRS score, an audit-selection score, an insurance score, a guarantee, or an assurance that a filed return is correct.
What the Federal Tax Defensibility Index measures
The FTDI measures how well the business’s applicable federal tax posture appears supported. The word "appears" matters: the index is built from the information and verified signals available to CompDefend at the time of the check, and it describes what that evidence supports. It is a measure of defensibility — the condition of the record behind a tax position — not a statement about what the IRS has done or will do. The category it belongs to is explained in depth in the business tax defensibility guide.
Defensibility is not one feeling about the business. It is the sum of specific areas — payroll, filings, contractor reporting, owner compensation, records, and the state of the IRS account itself — and the index grades only the areas that apply to the entity type and activities of the business being assessed. A consultant with no employees has no payroll area to grade; an S corporation with a working owner always has a compensation area.
What the 0–100 result means
The score is a whole number between 0 and 100. Higher numbers mean the applicable posture looks better supported from the evidence seen; lower numbers mean more of the picture looks thin, missing, or out of alignment. The result always presents the number with a band label such as Strong Defensibility, Watch, Exposed, or High Exposure, and — just as important — with the specific areas behind it.
A low score is a description of the record, not a verdict about the business or its owners. It means the parts of the position that could be seen would be hard to support if the IRS asked. The IRS selects returns through processes it does not publish in full, and an examination is not an accusation — some returns are selected at random. No score from CompDefend predicts whether any return will be examined.
What confidence means
Confidence is how much of the full picture the score could see. It is reported as a separate percentage, and it falls when something the index weighs was not observed. Confidence never raises the score. A high score with low confidence means the part that could be seen looks well supported, and there is more that has not been seen. A low score with high confidence means the visible part of the position looks thin, and the assessment saw enough of the picture to say so with more certainty.
On the free business tax check, confidence is capped below 100 by design. Two weighted areas of the index — balances and collection posture, and coverage completeness — live on the IRS account itself rather than on any form. A visitor who has not authorized anything has given CompDefend no account data, so those areas stay unobserved, and the result says so plainly in a "What this check could not see" panel. That is not a flaw in the check. It is the check being honest about the difference between what a business can tell you about itself and what only the account can show.
Why score and confidence are separate
Score and confidence answer two different questions. The score answers "how supported does the applicable posture look from what we saw?" The confidence figure answers "how much of the picture did we actually see?" Folding the two into one number would hide the difference between a business whose answers were complete and one whose answers covered a small fraction of the relevant areas.
The rule that keeps the two honest is simple and mechanical: missing information never increases the score, and it never makes a business look safer. An input the check could not observe earns zero points toward the score and lowers the confidence figure instead. There is deliberately no path by which "we have not seen this" becomes "this looks fine."
The posture areas behind the score
The index is built from weighted posture areas. Which areas apply depends on the entity and what the business actually does. The table below describes the areas at a level that lets you recognize them in your own records without exposing the proprietary weighting behind the score.
| Posture area | What it looks at | Where the evidence lives |
|---|---|---|
| Payroll and employment tax | Whether payroll is actually being run and deposits are being made on time | Payroll records, the deposit schedule, and the filed Forms 941 and 940 |
| Owner compensation support | For S corporations, whether the shareholder-employee’s salary is real, reasonable and documented before distributions | W-2 and payroll records, and the written support behind the salary |
| Filing history | Whether required returns are posting on time and consistently | The IRS account, transcripts, and filing confirmations |
| Balances and collection posture | Unpaid balances, penalties and collection activity on the account | The IRS account and transcripts — account-level, not visible on a check without authorization |
| Information return hygiene | Whether 1099s and W-9s are complete and consistent with who was paid | Contractor files and filed information returns |
| Books and separation | Whether business and personal funds are separated and the books are usable as evidence | Business bank accounts and accounting records |
| Election records | Whether the S-corporation election record is complete and dated | Election records and IRS acceptance evidence |
| Coverage completeness | Whether every form and period the business owes is actually covered by the assessment | The scope of the check itself — account-level, not visible without authorization |
Why defensibility can change between filings
Filing a return does not freeze the posture. The IRS keeps a running account for each business tax module — each form and period — and that account moves between filings: payments post or fail to post, penalties are assessed, notices are issued, and examination or collection activity is recorded. Owners often first learn about the movement from IRS mail. A transcript records account activity, but it never replaces the letter or a deadline printed on it. That is why monitoring the account is part of defensibility rather than an accessory to it, and why a defensibility measure is a point in time rather than a permanent grade.
What missing information means
Missing information reduces what CompDefend can confidently conclude. It is never framed as lowering risk or making the business safer. On the free check, "I do not know" and "I could not find the record" are treated as an absence of evidence, not as evidence of a problem and not as evidence of safety. The result lists what it could not see, so the gap is visible instead of hidden inside an average.
Signs it is time to take the free business tax check
- A notice arrived and you are not sure which one it is or what it is asking
- Payroll deposits or required filings have been inconsistent in the past year
- Contractor files are missing W-9s or 1099s, or you are not certain who was issued a 1099
- You could not immediately put your hands on the records behind a material deduction or position
- You have never looked at what the IRS account actually shows between filings
- You run an S corporation and the owner’s salary has never been documented as reasonable
What the index does not tell you
- It is not an audit probability. No score can tell you whether the IRS will examine a return, and any product that claims otherwise is overstating what a number can do.
- It is not an IRS score. The IRS does not issue the index, endorse it, or use it. The index is CompDefend’s own measure.
- It is not an audit-selection score or an examination prediction. The result never states that an examination has begun, is imminent, or will occur.
- It is not an insurance score. It does not set premiums or predict claims.
- It is not a guarantee. It does not promise any IRS outcome, and it cannot make a position immune to questioning.
- It is not an assurance that a filed return is correct. It measures how supported the posture appears, not whether every number on the return is right.
If the business has received an IRS notice, the notice itself — not any score — controls what the IRS is saying and what response or payment date applies. The guide to reading an IRS notice is the right place to start when a letter is in hand. The index is the broader measure of the posture the notice may be reacting to.
When the free business tax check is the logical next step
The free check is the front door to the index. It adapts to what the business actually does, scores only the areas that apply, returns the 0–100 index with its separate confidence figure, and names the weak areas with what stronger posture would look like. Taking it is the natural next step after reading this page, before deciding what to work on.
What the free check returns
- Your Federal Tax Defensibility Index.A 0–100 measure of how well the applicable posture appears supported, presented with a band label and never described as an audit prediction.
- A separate confidence figure.How much of the full picture the check could see, with the areas it could not observe named rather than hidden.
- The weak areas, named.Each applicable area is graded, and the ones that look thin come with a plain-language description of what stronger support would look like.
- A truthful next step.Where owner compensation is the weakness, a documented reasonable compensation study is the standard remediation. Where the account itself is the gap, Radar reads supported federal business accounts weekly under a Form 8821 authorization.
Where CompDefend fits — and where it does not
What CompDefend does
- Measures the applicable federal tax posture free, through an adaptive assessment that returns a 0–100 Federal Tax Defensibility Index and a separate confidence figure.
- Names the weak areas and what stronger support would look like, in plain language a business owner can act on.
- Shows what the check could not see, so missing information is visible instead of hidden inside the score.
- Monitors supported federal IRS business-account activity weekly under a Form 8821 authorization, through CompDefend Radar, when the account itself is the gap.
What CompDefend does not do
- Predict whether the IRS will examine any return — no one can, and the index is not an audit probability, audit-selection score, or examination prediction.
- Guarantee any IRS outcome, or claim to make a position immune to examination or questioning.
- Represent you before the IRS — Form 8821 permits reading account information, not speaking or acting for you.
- Prepare or file returns, or assure you that a filed return is correct.
See where your business stands
The free check returns your Federal Tax Defensibility Index, the confidence figure behind it, and the weak areas named. It measures how supported your posture looks, never the odds of an audit.