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The title company sends the IRS a 1099-S form when you sell your house showing how much you sold it for. This is true even if all the capital gains you made on the sale are tax exempt because they weren’t more than $500,000 if you're married or $250,000 if you’re single. It is recommended that you still report the information on your income tax return anyway. Why is this? It's because that 1099-S will be part of the IRS’s automated form-matching program. If you don't report it, this can lead to a correspondence audit.
#8. Be wise about your mortgage interest
When you and your spouse own a home, your mortgage holder will send both you and the IRS a form 1098 showing the amount of interest you paid the past year. This is an area where you need to be careful because there are cases where the 1098 has only the Social Security number and name of one of you. If that person were to die and the surviving partner tries to take the deduction, a correspondence audit may be triggered. When this is case you need to have the mortgage holder change the name and Social Security number on the 1098 to yours before it’s filed.