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Documentation is the word of the day at the IRS Tax Forum

All three of the sessions I've attended on this first day of the Dallas/Fort Worth area IRS Nationwide Tax Forum have one thing in common: cover your tracks.

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Form 8867 got a lot of attention during the Earned Income Tax Credit (EITC) due diligence session. This is the checklist to help ensure that the person claiming the EITC and any children considered in connection with the credit do indeed meet tax code qualifications. Tax preparers must submit this form with the taxpayer's return and EITC claim.

Tax pros also were reminded to keep in their own records copies of any documents used to determine a taxpayer's eligibility for and the amount claimed under the EITC.

Next up was substantiation of business expense deductions, or as it is commonly known in tax professional circles, "what the hell were you thinking when you claimed that expense?"

Rod Ervin, a registered tax return preparer (RTRP) and representative for the National Society of Tax Professionals, covered a lot of area in his 50 minute segment, but throughout he emphasized documentation. 

Records not only monitor the progress of a business, noted Ervin, but are information critical for preparing income tax returns and, if worse comes to worst, defending those income tax returns.

My final session this morning was on like-kind changes. Obviously records are critical here as you must show that your exchange of assets was qualified and how much tax is deferred.

I must admit the main thing I took away from the Section 1031 exchange discussion was that if I ever considered such a move, I'm first finding a like-kind exchange expert!

The bottom line, as it has been since the modern tax code was enacted 100 years ago, is that any tax claim requires substantiation. Remember, documentation is your best friend.

Tax tunes: As long-time readers know, I'm a music nut and I also take note of the songs that are played between the Tax Forum sessions.

Today's play list was full of The Police. Hmmm. An implicit enforcement message, perhaps. Here are the songs I caught:

  • Roxanne, Message in a Bottle (sending out an SOS), Don't Stand so Close to Me and Walking on the Moon by The Police
  • Fell on Black Days by Soundgarden
  • Monkey Man by Amy Winehouse
  • All Along the Watchtower by Jimi Hendrix
  • Satisfaction by the Rolling Stones
  • Whenever, Wherever by Shakira
  • You Dropped a Bomb on Me by The Gap Band
  • September (Do You Remember?) by Earth Wind and Fire

Off now to grab a bite of lunch then head to IRS Principal Deputy Commissioner Daniel Werfel's presentation on "Charting a Path Forward at the IRS."


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