1. Do not boast about how you got away with undeclared income. Ever heard of whistleblowers? They earn rewards of 15% to 30% of your assessments.
2. Do not hide interest and dividend income from the IRS. Remember Murphy’s Law: IRS sends a notice of unreported income of some savings and stock brokerage accounts that you’ve been hiding from your beloved spouse. Surprise, honey.
3. Do not estimate income from interest, dividend, independent contract, partnerships, S-Corporations, or LLCs. Banks, stockbrokers and entities send exact amounts of your income to IRS via form 1099s and K-1s. Estimates are bad. They generate mismatch – the main source of correspondence audits.
4. Do not estimate mortgage interest because lenders send exact amounts via form 1098 to IRS.
5. Do not claim unsupported charitable contributions or use big round numbers that look like guesstimates.
6. Do not dump amounts into “miscellaneous” deductions.
7. Do not exceed national averages for donations, mortgage interest, or taxes if you do not have documentation. IRS computers compare your deductions with others in your income bracket. Excess deductions could increase your DIF score, a secret IRS formula to select returns with the highest probability of helping reduce budget deficits via audits.
8. Do not consistently file late returns. It speaks of a taxpayer who disregards tax laws – a fair game for scrutiny.
9. Do not submit shoddy tax returns. A shoddy return speaks of a disorganized scatter brain who probably does not keep good records or any record at all – a good catch for an IRS agent.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].