re: taxes on winnings

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Do you think there is any way to avoid correspondence in this circumstance?

If he puts $4k or $2k? I don't think so. He will have to communicate this issue almost certainly if he chooses not not use the full $4k.

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There is defintely a better chance to avoid it if he uses 4K instead of 2K. The IRS relies more now on automation then ever with their reduction of staff. He his wife's SSN is on any documentation with income on it, and the tax return does not match, he will be flagged for corespondence.
He will get a letter stating that "the income on file with the IRS does not match entries on your Form 1040. Here are the proposed changes to your tax"

He has a better chance of avoiding the IRS by reporting the 4K, and then reducing it.

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There is a place to put it as a deduction or would that be somewhere else?

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I would list under Other Income and include a statement. Would look something like this

Misc.Winnings per 1099 4,000
Less unusable/expired value ( 2245)
Net 1755