Part 5/9:
Record-keeping is essential. Maintain detailed documentation of all purchase prices, dates, and sale amounts for stocks, bonds, real estate, mutual funds, and other securities. This thorough record-keeping helps prevent over- or under-reporting, which could invite scrutiny.
3. Tax Deductions and Credits
The IRS closely examines deductions claimed on your return, especially unusually large or suspicious ones. Charitable contributions, business expenses, and other itemized deductions are scrutinized to prevent abuse. If your deductions significantly deviate from those of similar taxpayers in your income bracket, it may trigger an audit.