A news release reached me recently concerning a book that may be of interest to some of you as tax time approaches.
"The Dictionary of 1040 Deductions for 1982" is a reference manual with detailed information on more than 1,800 possible tax deductions and credits.
Most of these, of course, will not be useful to the average taxpayer. But there may be enough nuggets of information there to more than make up for the $25 purchase price.
The book is available by mail from Michael Shor, c/o Matthew Bender & Co., 235 East 45th St., New York, N.Y. 10017.
According to the news release, the book covers Form 1040 Schedules A through F, plus the adjustments to income that go on page 1 of the 1040 without a supporting schedule.
The publishers claim that every eligible individual 1040 tax deduction is examined, with an explanation of what may be deducted, who may deduct it and where it is claimed on the return.
All of which is by way of introduction to a part of the book that disturbs me: a discussion of the items on a tax return that might cause your return to be singled out for an IRS audit.
Let me quote from the publisher's blurb: "One of the most important assets of the new dictionary is the unique section on Audit Triggers that lists over 150 items that may trigger an audit."
Then the publishers talk about the "top 10" audit triggers, including 1040 business (Schedule C) returns with more than $100,000 gross revenue, tax shelter activity, travel and entertainment expense, and a home office deduction.
Taxpayers "should be most careful to avoid" these audit triggers when filling out their 1981 tax returns, Matthew Bender & Co. says.
Baloney! The only thing taxpayers should avoid when filling out their tax returns is incorrect information. In the first place, I don't know how you avoid some of these things. Do you close your business when you hit $99,000 in gross revenue to avoid reaching the trigger ceiling?
The clear implication is that you either should avoid participating in an activity such as a tax-sheltered investment that might trigger an audit or else don't take a deduction to which you are entitled, such as auto expenses or a casualty loss (other items on the list).
During my years as a tax consultant, I always have recommended claiming every legal adjustment, deduction or credit to which the taxpayer is entitled and that could be supported by documentary evidence.
To take an unauthorized deduction because it is in an area that normally won't generate IRS audit interest is cheating the government. But to refuse to claim a legal and substantiated deduction because it may trigger an audit is cheating yourself.
On occasion I have represented or accompanied clients at an audit. Although I didn't keep score, I am sure we came away more often with a "no change" ruling than with an additional assessment.
And in several cases we ended up with a further refund, when detailed scrutiny in preparation for the audit uncovered credits the taxpayer had overlooked.
The "what-can-I-get-away-with" approach--treating yourself to an extra deduction because you think it will not be picked up--is wrong.
But I am equally opposed to going to the opposite extreme and not claiming a legal deduction because it may excite IRS interest. I would suggest only that you attach an explanation to your return if you have a highly unusual or extraordinary entry.
This is not a review of the book. "The Dictionary of 1040 Deductions" may well prove to be valuable to many taxpayers.
But don't buy any tax book just to find out what might bug the IRS. When you start your return, be prepared to pay every nickel due the government. But also be ready to claim every nickel of tax reduction to which you are entitled.
And don't worry about the possibility of triggering an audit. Next week we'll take a look at what an audit involves. Maybe we can relieve some of the sheer terror that seems to accompany an IRS notice of audit.
Abramson is a family financial counselor and tax adviser. Questions of general interest on tax matters, insurance, investments, estate planning and other aspects of family finances will be answered in this column. Advice cannot be given on an individual basis. Address all questions to E.M. Abramson, The Washington Post, Business & Finance News, 1150 15th St. NW, Washington, D.C. 20071.