What interests the IRS? Some higher risk areas are – 1. Tax shelters. Though most new tax shelter write-offs have been eliminated by tax reform, old shelter deductions will continue to interest the IRS. Returns with passive income and losses are certain to be scrutinized. 2. Tax protests. Both the IRS and tax courts are getting fed up with what they consider frivolous tax protests. If you file a return stating that you owe no tax because the dollar is worthless or make some other such protest, you'll probably be audited. 3. High income. Because auditing higher-income taxpayers is likely to produce more additional tax revenue than auditing lower-income taxpayers, this category is targeted by the IRS. 4. Certain occupations. Taxpayers whose occupations produce cash income, such as taxi drivers and waiters, run a higher risk of being audited. Self-employed individuals, particularly independent contractors, are IRS targets for the same reason; they are more likely to have unreported cash income. 5. No preparer or a problem preparer. If you have a complex return and prepared it yourself or if your return was prepared by someone on the IRS's problem preparer list, you are more likely to be audited. 6. Certain deductions. The IRS has found it profitable to audit returns that claim office-in-the-home deductions, travel and entertainment deductions, and certain other write-offs where they feel taxpayers stretch the truth. 7. Related party transactions. Taxpayers who involve family members in their financial operations are more likely to be scrutinized by the IRS. Paying wages to your children, lending money to relatives, splitting income among family members, or running a family business will make the IRS more interested in your returns. What other information is collected but not used at this time? 1. Cash Transactions reports are posted to your personal tax record. These are the reports of cash transactions of more than $10,000. If your transaction is legal don't worry about this! It is a crime if you structure transactions to avoid the report. If you receive money from overseas, you must file a special report. This will be important to dual nationals or individuals who immigrated to the United States. 2. When a passport is issued, a note is made in your personal tax record.