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The LynnLeigh JournalLife. Investing. And Everything in BetweenTaxpayers invest about 13 hours preparing their tax returns, accordingto the IRS’s instructions for Form 1040.More specifically, the IRS says that the average nonbusiness taxpayerspends nine hours preparing a tax return, which includes three hoursof record keeping. For taxpayers who file a business return, expectaround 24 hours, with about half of that spent keeping records.No wonder it’s easy to make a mistake. Time-consuming or not, theIRS isn’t always in a forgiving mood when errors pop up.Even if you hand your records to your accountant or CPA, forgettingimportant documents can delay your refund, force an amendedreturn, or worse, trigger an audit.BEST PRACTICES TO MINIMIZE ANAUDITBy Kelly L. Olczak, CFP® Brief Market Update -Election-YearShenanigans7 Ways to MinimizeAudit RisksNewsletterHighlightsInvesting Wisdomfrom the OracleM A R C H 2 0 2 4V O L U M E 3Today’s InvestmentClimate

The income above is derived from various sources, but they share a common thread: They alltrigger a form. If income triggers a form, the IRS will receive a duplicate copy.Good record-keeping and reliable tax software that reminds you of the previous year's activitiescan help eliminate errors.If possible, stay consistent with the same tax software, which will remind you of the forms youused the previous year.1. You’ve probably heard it before, but let’s start with the basics.One of the biggest mistakes folks make is filing a return beforethey have all their 1099s and W-2s.By now, you’ve probably received any corrected 1099 forms. But inthe future, be careful about filing by early February (gosh, I knowthat feels good, but…) and getting a notice in late February thatyour brokerage firm has adjusted your original 1099.2. One reason taxpayers get into trouble is the failure to reportincome from:regular wages (W-2),Social Security (SSA-1099),pensions, IRA distributions, and annuities (1099-R),partnership income (K-1),income from an independent contractor gig (1099-NEC),rent or royalties (1099-MISC),real estate sale proceeds (1099-S), andincome from interest (1099-INT), dividends (1099-DIV), orcapital gains (1099-B).M A R C H 2 0 2 4 V O L U M E 37 Ways to Minimize Audit Risks

M A R C H 2 0 2 4 V O L U M E 3Good record-keepingDid you receive the form in the mail? Put it in your “tax drawer.” Did you receive an emailalerting you that your 1099 is available? Save the email in your tax year 2023 email folder. Don’thave a tax year 2023 folder or tax drawer, then create one.We can’t overemphasize the importance of good record-keeping.3. Watch out for business losses. Most businesses lose money in the early stages. But if yourbusiness is losing money year after year, it could raise suspicions that it is simply a hobby.You may love golf. You may even teach beginners how to play. But if your golfing business can’tturn a profit, the IRS may decide it’s a hobby.Or it may raise suspicions that you are misreporting income or expenses. This can be especiallytrue for cash-based businesses.That doesn’t mean you shouldn’t report losses. Keep detailed records for at least seven yearsdemonstrating legitimate expenses.4. Let’s turn to deductions. Is a charitablededuction outside of what is considered“normal,” i.e., much higher than the averagecharitable deduction based on your income?Be sure you keep careful records. Overalldeductions for donations to public charities,including donor-advised funds, are generallylimited to 50% of adjusted gross income (AGI).The limit increases to 60% of AGI for cashgifts, while the limit on donating appreciatednon-cash assets held more than one year is30% of AGI.

M A R C H 2 0 2 4 V O L U M E 3The home office deduction is becoming increasingly popular, but you must be self-employedand conduct most of your business from home. If your company allows you to work fromhome and you are a W-2 employee, don’t even consider taking the home office deduction.Starting in tax year 2013, the IRS began allowing taxpayers to take what they call thesimplified option. It is a standard deduction of $5 per square foot, a maximum of 300 squarefeet.It’s much simpler than the standard method, and there is no recapture of depreciation uponthe home's sale, but your deduction will probably be lower.5. As a business owner, your income may fluctuate. But wild swings in income can put anunwanted spotlight on your tax return because it may raise suspicions that you may not bereporting all of your income.Consider a note when filing if expenses or income changes dramatically. Most softwareprograms will let you include documentation that sheds light on your unique circumstances.Other deductions: How much is too much?How much is too much? No one really knows, but ifit is too far outside the norm, IRS computers mayflag your tax return. Again, keep detailed recordsthat substantiate your deductions.6. Does the IRS suspect that you have $10,000 or more in foreign accounts and have notfiled a FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), or ifthey believe you reported incorrectly or have misreported values on the FBAR, you may besubject to an audit, according to Bloomberg Tax.

M A R C H 2 0 2 4 V O L U M E 37. Avoid abusive tax shelters. More recently, questionable transactions identified by the IRSinclude abusive syndicated conservation easements, abusive micro-captive insurance companyarrangements, and Malta retirement plans (Bloomberg Tax).In addition, scams involving the earned income tax credit, sick leave, family leave, and false fueltax credit claims can trigger an audit.Bottom lineIt’s impossible to bulletproof a tax return completely, and high-income taxpayers will comeunder more scrutiny simply because of their income. But you can reduce the risk, and if audited,you will be in a better position to quickly answer questions and put the exam in the rearviewmirror.If the IRS contacts you, you probably won’t receive an invitation for an at-home audit. Instead,you will receive a letter detailing the money the IRS believes you owe, along with penalties andinterest. The IRS will give you a specified amount of time to prove that your original filing iscorrect. Provide the documentation requested. If everything looks good, you’ll be clear.Please let us know if you have any tax-related questions. As always, feel free to reach out to yourtax advisor.Key tax filing datesApril 1, 2024 - RMD due if you turned 73 in 2023.April 15, 2024 - Tax Day (unless extended due to local stateholiday).April 15, 2024 - Deadline to File Form 4868 and request anextension.April 15, 2024 - Deadline to make IRA and HSA contributions fortax year 2023.October 15, 2024 - Deadline to file your extended 2023 tax return.Source: Intuit

M A R C H 2 0 2 4 V O L U M E 3B R I E F M A R K E T U P D A T EElection-Year ShenanigansInvestors disregarded disappointing inflation numbers last month and talk of fewer ratereductions this year. Instead, they remained fixated on robust business earnings and risingenthusiasm for AI, or artificial intelligence.As the table illustrates, U.S. stocks are off to a good start this year.During a presidential election year, investors often wonder about the impact on the market.Well, stocks usually appreciate during presidential election years, but an annual gain is notunusual. Historically speaking, broad-based market indexes have a long-term upward bias.So, let’s review the data for any discernable trends.

M A R C H 2 0 2 4 V O L U M E 3Since 1928, the S&P 500 Index has averaged an annual increase of 11% (dividends reinvested).The index finished the calendar year higher 73% of the time, according to data provided by theNYU School of Business.During a presidential election year, the S&P 500 index also advanced an average of 11%. That isto say that a presidential election appeared to have no influence on stocks. Election or noelection, the S&P 500 averaged 11%; end of story, right?Let’s take it one step further and review returns when the incumbent was running for re-election.When the incumbent sought a second term, the S&P 500 averaged an advance of 15% andfinished the year in positive territory 93% of the time.The return not only exceeded the longer-term average, but the 93% “win rate” topped thepresidential “win rate” of 83% and the longer-term “win rate” of 73%.

M A R C H 2 0 2 4 V O L U M E 3Of course, there’s no guarantee stocks will follow the historical pattern. Exercises such as thesemake for fascinating conversation but not much more, in our view.Today’s climateToday's political environment is filled with acrimony and bitterness, but we caution againstmaking investment decisions tied to political headlines. It’s common to hear pundits proclaimthat this election is “the most important in our lifetime.” But that has more to do with hype andvoter turnout.Unquestionably, the winner will help set the course for the nation. However, investors viewmarket performance through a very narrow lens.Year after year, the economic fundamentals have fueled gains or losses in equities. Interestrates, economic activity, corporate profits, and inflation are the variables that have historicallyinfluenced market sentiment, not elections or the party that wins.Investment Wisdom from the Oracle...As legendary investor and the chairman ofBerkshire Hathaway, Warren Buffettpointed out in his annual letter toshareholders last month:“Occasionally, markets and/or the economywill cause stocks and bonds of some largeand fundamentally good businesses to bestrikingly mispriced. Indeed, markets can—and will—unpredictably seize up or evenvanish as they did for four months in 1914and for a few days in 2001,” he said.

M A R C H 2 0 2 4 V O L U M E 3“If you believe that American investors are now more stable than in the past, think back toSeptember 2008. Speed of communication and the wonders of technology facilitate instantworldwide paralysis, and we have come a long way since smoke signals. Such instant panicswon’t happen often—but they will happen.”But, as Buffett opined, “Thanks to the American tailwind and the power of compoundinterest, the arena in which we operate has been—and will be—rewarding if you make acouple of good decisions during a lifetime and avoid serious mistakes.”We’ll sum up our letter to you with this final remark from him. “It’s harder than you wouldthink to predict which (businesses) will be the winners and losers. And those who tell you theyknow the answer are usually either self-delusional or snake-oil salesmen.”That’s one reason why we stress the importance of diversification, not the political headlineof the month. It allows us to participate in the “American tailwind.”Final thoughts...I really think Warren Buffett stands out as a rock-solid investor. Learning from him has beenincredibly valuable, especially his knack for navigating the ups and downs of the market with aclear "Buy Low - Sell High" strategy. It's something that has really shaped our firm's approach,keeping us focused on the long game. If you're one of our clients, you've probably seenfirsthand how we stick to our guns, even when the market gets a bit wild.If you don’t work with our firm yet, I think it’s important for you to understand ourphilosophy. We embrace the wisdom of investing giants like Warren Buffett and applyingthose insights to our modern strategies. We're excited about the possibility of guiding youthrough your investment journey, offering clarity and confidence in your financial decisions.Whether you're already with us or thinking about taking the first step, our commitment toyour success remains unwavering. Let's navigate the future together, building a portfolio thatstands the test of time and brings your financial goals within reach.

M A R C H 2 0 2 4 V O L U M E 3LynnLeigh & Company - A Registered Investment AdvisorThis information is provided by LynnLeigh & Co. for general information and educational purposes based upon publicly available information from sources believedto be reliable – LynnLeigh & Co. advisors cannot assure the accuracy or completeness of these materials. The information presented here is not specific to anyindividual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayerfor the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or herindividual circumstances. The information in these materials may change at any time and without notice. Past performance is not a guarantee of future returns. That wraps up our adventure through the world of tax audits and the latest market trends! Wehope you found our tips as handy as a Swiss Army knife during tax season and our marketoverview as insightful as a crystal ball. Remember, we're here to help you navigate thesewaters with ease and confidence. So, until next time, keep your calculators close, yourfinancial documents closer, and let's sail smoothly into financial success together! Stay savvy,stay smart, and, most importantly, stay smiling!