- Be Reasonable. Do not be afraid to take deductions and losses to which you are entitled.
- However, do not take tax positions you are uncomfortable defending. Call it karma. If you generally take reasonable tax positions, you may not need to defend them. You might even take aggressive positions, but it’s best to do it with your documents and authorities lined up. That way, if you do face an audit, it will likely be far easier.
- In the end, you can’t predict the trigger (and you can drive yourself crazy trying). Still, you can be reasonable about every item on your return.
- Don’t Over-Explain. You’d be surprised how many professionals and amateurs alike try to submit too much information. If your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don’t provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS.
- Get Professional Advice. Some people argue that a return prepared by a professional is less likely to be audited, but there’s little reliable data to support it. Nevertheless, having a professional prepare your return - or at least give you advice on anything quirky - is a good idea.
- Don’t Omit Forms 1099. IRS Forms 1099 come in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS. So regardless of how many 1099s you receive, make sure they all are accounted for on your return.
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