The following are likely IRS exam/audit issues according to the Internal Revenue Manual (IRM 4.19.11.2.1.1)

• Itemized Deductions:
  • Unusually high total deduction.
  • Itemized deductions are not claimed elsewhere on the return when standard deduction has been elected.
  • A taxpayer reporting married filing separate on the return, may not have made the same election for itemized deductions versus the standard deduction as the other spouse.
  • Significant car and truck expenses (e.g. mileage).
•  Medical Expenses:
  • Overall medical, dental etc., expense in relation to the AGI.
  • Medical expenditures for a capital asset.
• Tax Deductions:
  • Real estate taxes (often looking for consider changes in address).
• Interest Expenses:
  • Interest payments to individuals.
  • Closing costs on real estate transactions.
  • Interest as a result of a mortgage greater than the indebtedness limit.
  • Interest payments deducted as personal interest.
• Charitable Contributions:
  • Large Charitable contributions donations or property or cash made to any charitable organization.
  • Payments that may represent tuition.
  • High ratio of the contribution to the taxpayer's total positive income.
• Casualty or Theft Loss:
  • No insurance reimbursement.
  • Business assets, valuation methods and statutory limitations.
• Miscellaneous Deductions:
  • Large, unusual or questionable items that do not correspond to the taxpayer's occupation or income level.
• Pension and/or Annuity:
  • Premature distribution from a pension/profit sharing plan.
  • Amounts are not reported elsewhere on the return.
  • Distribution not properly claimed as a lump sum distribution.
• Unreported Income:
  • Relationship between income reported on the return and exemptions and deductions claimed.
  • Sources of income and any omission of income.
  • Information Reporting Program mismatch.
  • Occupations likely to have unreported cash income, for example: waiter, cab driver, porter, beautician, etc.
  • Improper exclusions.
• Moving Expenses:
  • Truthfulness of move (IRS looks for sale of residence and/or research on new and old address).
  • Not eligible due to employer reimbursement.
• Alimony Deductions
• Credits:
  • EITC.
  • Child Tax Credit.
  • Child and Dependent Care Credit.
  • Education Tax Credits - Hope and Lifetime Learning.
  • Premium Tax Credits.
  • Qualified Adoption Credits.