Exhibit 3-2

How Classifiers Identify Significant Issues on Individual Nonbusiness and
Business Tax Returns (Internal Revenue Manual, Part IV)

Exhibit 3-2: Checklist of What Rules and Information the IRS Will Be Verifying:

Reportable Income

• Earned Income
• Nontaxable Income
• Other Income
• Reimbursement and Allowances
• Rental Income
• Unearned Income
• Discharged Student Loans

Excludable Income

• Scholarships and Fellowships

Deductions and Expenses

• Alimony
• Bad Debts
• Capital Gains and Losses
• Casualty and Theft Losses
• Contributions
• Depreciation
• Educational Expense
• Entertainment
• Exemptions
• Gifts
• Insurance
• Interest Expense
• Legal Expenses
• Losses
• Medical and Dental
• Moving Expenses
• Net Operating Loss
• Office in the Home
• Rental Expenses
• Retirement Plans
• Taxes
• Tools
• Travel and Transportation
• Work Clothes
• Miscellaneous Expenses

Tax Credits

• Earned Income Credit
• Elderly Credit

Other Taxes

• Alternative Minimum Tax
• Self-employment and FICA Tax

Tax Computations

• General
• Community Property Laws

Filing Status

• General

Next Section: Avoiding Tax Scams, Shams, and Illegal Shelters

Audit Proofing Main | Home

© 1986, 1998 to 2002, Jack Warren Wade, Jr.