1. Report It All
For every W-2 and 1099 you receive, the IRS gets an exact copy. And they've got a matching system, so if you forget to report some income, there's a huge chance they'll notice. Follow up with any company that you've worked for or any bank that has your money. They don't legally have to send you a 1099 if you earned less than $10 in interest or $600 in salary, but if they report it to the IRS, you need to too.
2. Fix Errors
Sometimes even big companies make big mistakes. Review all 1099s and W-2s closely and make sure they're for the right amount and for the tax year in question. If you find a glitch, don't ignore it. To be safe, go through all of your banking records, pay stubs, and check registers to make sure you actually received the money each 1099 and W-2 says you did.
3. Keep All Records
People who only have W-2s are less likely to raise concern, but if you're self-employed and take itemized deductions, hold on to all records -- the more detailed, the better -- for three years from the date you file. That's how long the IRS has to audit you.
4. Be Detailed
When you donate stuff to Goodwill, make a list of every single piece, your estimated value of each piece, and how you determined the price (you definitely need this if donations total more than $5,000). Itemized deductions that are too expensive for someone with your salary will catch the eye of the IRS. So will large deductions that don't jibe (like you deduct a car but you don't drive for work). If you outline your records now, you won't have to rack your brain if the tax man comes calling three years later.
5. Name Names (and Numbers)
Make sure the deductions or incomes you list are called the right things (a business horse-riding venture can't be labeled "horses" or the IRS might think you lost money at the racetrack). If your numbers seem out of whack, disclose the reason why. Why was your real estate tax so high this year? Why did you make such a big donation to The Clay Aiken School for the Audibly Impaired? Explain everything so there will be no room for misinterpretations.
6. Be Neat
This is no time for messy handwriting. Have a neat return. Add correctly and don't scribble -- it may be keyed in wrong at the processing center. Better yet, e-file to avoid human mistakes (yours and theirs). Or try putting together a computer-generated return with a program like TurboTax.
7. Be on Time
It's not that hard, but also avoid rushing to file. Tax laws are complicated, and you don't want to make any mistakes. Or, in your attempt to be ahead of the game, you might not have received all of your 1099s (or revised 1099s), which means your calculations will be inaccurate.
8. Sign Your Return
It's a common error. No John Hancock means no processing, so the return gets returned (ha!).
[Nestperts] Ginita Wall, CPA, CFP, and director of wife.org (Women's Institute for Financial Education); and Carol Buchman, a CPA and CFP in New York City
by Grace Jidoun
7/1/08
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