Which of the following situations may be a red flag that could trigger an IRS audit?

Kimberly owns and operates a brick and mortar bookstore that focuses on children's books. Her accounting system is digital, including her inventory. She rarely make cash sales.

Jerry and Ashley own and operate A-Jay Ice Cream, Inc. They run their business efficiently and have timely filed their Form 1120, U.S. Corporation Income Tax Return, since they began operations three years ago. Their net profit has been small, but consistent over the past three years.

Morley is a sole proprietor. She owns and operates a nail salon, which generates a significant number of cash transactions. She has filed her Schedule C (Form 1040) showing losses in excess of $5,000 for the last four years.

Jessica is the sole shareholder of an S-corporation. Her business provides accounting services for small businesses. In her first year of operations she had more expenses than income. She reversed that trend and has earned a small profit the last two years.