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Keep thorough records to support deductions and credits from "summary" of The Tax and Legal Playbook by Mark J. Kohler
As a taxpayer, it's crucial to keep thorough records to support any deductions and credits claimed on your tax return. Without proper documentation, you could find yourself in hot water with the IRS if they decide to audit your return. This means keeping organized records of all expenses, income, and other relevant information that pertains to your tax situation. One of the most important reasons to maintain thorough records is to substantiate any deductions you claim. This includes receipts, invoices, bank statements, and any other documentation that proves your expenses were legitimate and necessary for your business or personal activities. Without these records, you could face penalties and interest if the IRS determines that your deductions are not supported by adequate documentation. In addition to deductions, keeping thorough records is also essential for claiming tax credits. Tax credits can significantly reduce your tax liability, but you must be able to prove that you qualify for them. This means keeping records of any expenses or activities that make you eligible for a particular credit, as well as any supporting documentation required by the IRS. Furthermore, maintaining thorough records can also help you in the event of an IRS audit. If you have detailed records that support your tax return, you'll be in a much better position to defend your position and prove that your return is accurate. This can help you avoid additional taxes, penalties, and interest that may be assessed if the IRS finds discrepancies in your return.- Keeping thorough records is a fundamental aspect of good tax compliance. By staying organized and documenting all relevant information, you can not only support your deductions and credits but also protect yourself in the event of an audit. It's a simple yet crucial step that can save you time, money, and stress in the long run.
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