Keep the IRS Bored
Nothing to see here...move along
Dear Divine Client,
The folders are open. The PDFs are PDFing. And somewhere between your 1099-DIV and that charitable receipt you’re sure you saved, you’re wondering if you've forgotten anything.
We've prepared ten things to keep the tax man from coming for YOU — especially if your income is layered, your assets are meaningful, or your life shifted this year.
BTW- We don’t prepare tax returns at Divine, and this email does not contain personalized tax advice--but we do pay very close attention to how your financial life flows 👇
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1. The IRS Doesn’t “Randomly” Audit
Returns are scored. Algorithms compare you to statistical peers.
Large swings from prior years, income that looks inconsistent, or deductions that sit outside the norm raise flags.
If something changed materially this year — document it. Clarity wins
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2. Income Mismatches Are the Fastest Way to a Letter
The IRS receives copies of everything:
W-2s
1099-NEC / MISC
1099-INT / DIV
1099-B
1099-R
K-1s
If your return doesn’t match what they already have, you’ll hear about it. Often automatically.
It doesn’t have to be malicious. It just has to be incomplete
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3. Brokerage Cost Basis Errors Are More Common Than You Think
If you’ve transferred accounts over the years, inherited assets, or held legacy positions, cost basis can be wrong.
Wrong basis = wrong tax.
Especially for inherited assets — stepped-up basis rules matter. Review your 1099-B carefully.
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4. Large Charitable Deductions Require Precision
If your giving is meaningful relative to your income, documentation must be airtight.
Cash gifts require bank records.
Non-cash gifts over $5,000 require a qualified appraisal.
Stock donations must reflect correct cost basis.
And important: under current law, the charitable deduction limit for cash gifts to public charities is 60% of AGI. That is scheduled to revert to 50% of AGI beginning in 2026.
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5. Rental Losses & “Real Estate Professional” Status
Passive loss rules are strict.
Real estate professional status requires documented time logs and material participation.
The IRS scrutinizes this area carefully, especially for high-income households attempting to offset other income.
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6. Business Losses That Look Like Hobbies
Side businesses that generate repeated losses can draw scrutiny.
The IRS generally expects profit intent — commonly measured as three profitable years out of five.
If you’re building something new, be prepared to show it’s a business, not a pastime.
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7. Backdoor Roth Contributions Done Sloppily
High earners often fund a nondeductible IRA and then convert it to a Roth. Perfectly legal. Widely used.
The complication? If you already have pre-tax IRA money sitting anywhere, the IRS applies the pro-rata rule — meaning part of that conversion becomes taxable whether you intended it or not.
And if Form 8606 isn’t filed correctly, the confusion can trail you for years.
The move itself is sound. The execution has to be spot on.
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8. Estimated Tax Underpayment Penalties
Capital gains.
Large dividends.
Consulting income.
K-1 distributions.
Safe harbor rules require paying either 100% (or 110% at higher income levels) of your prior year’s tax to avoid penalties.
This is missed more often than it should be. (This one is for ME.)
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9. Net Investment Income Tax (3.8%)
High earners often forget this layer:
Capital gains, dividends, rental income — all can be subject to the additional 3.8% NIIT above certain thresholds.
The IRS overview of the 3.8% Net Investment Income Tax is here.
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10. Stuff Affluent Households Overlook
• Qualified Charitable Distributions (if over 70½)
• Donor Advised Fund “bunching” in high-income years
• Reviewing beneficiary designations (they override wills)
• Annual exclusion gifting strategy
• Coordinating business retirement plans — especially 401(k)s and cash balance structures
And for business owners: is your 401(k) optimized?
Are profit-sharing contributions structured intelligently?
Are you leaving deductions on the table simply because no one stepped back to design it properly?
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A Word on Tax Advice
Divine does not prepare tax returns.
We don’t give technical tax opinions.
What we do is help you see how tax lives inside your overall financial architecture.
If you need a CPA or tax attorney, we can connect you to serious operators in our network — people who think strategically, not transactionally.
And we do not engage in referral-fee arrangements.
Ever.
Our introductions are uninhibited and entirely aligned with your best interest.
Want Fresh Eyes?
• Reviewing your business 401(k)?
• Structuring retirement contributions?
• Getting a second opinion on anything before you sign?
• Making sure your portfolio positioning is tax-aware going forward?
Let’s talk.
Divine Asset Management LLC, PO Box 5, Lake Hill, NY 12448, United States, 3474809212