The IRS has established various tax examination techniques, and also published
IRS Audit Manuals covering business activities. The topics discussed in these manuals are helpful guides for clients and tax preparers.

Some of the selected areas include:

1. Fringe benefits, especially personal use of company cars.

2. High income and/or high wealth taxpayers. These include taxpayers with an income of more than $1 million, and who file as self employed individuals.

3. Abusive transactions, especially international transactions, and taxpayers who do not report overseas bank accounts, where required.

4. S corporations, with an emphasis on losses in excess of invested capital, reasonable compensation paid to officers for services, and underreporting of Social Security and Medicare income.

5. Proper worker classification. The IRS claims that it costs about 30% less to classify workers as independent contractors instead of as employees. With the new tax laws regarding the types of income subject to Medicare taxes, this issue assumes greater significance.