The absence of records results in the disallowance of tax deductions and credits on audit. This is particularly true for expenses that are subject to the higher substantiation requirement in Section 280F, such as travel expenses. In Baker v. Commissioner, T.C. Memo. 2014-122, the court considered whether a truck driver’s transportation expenses are subject to the…
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IRS Audits
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Truck Expenses Not Deductible Due to Inadequate Mileage Log
In Houchin v. Commissioner, T.C. Summary Opinion 2014-29, the U.S. Tax Court concluded that truck expenses were not deductible as the mileage log did not note the locations the taxpayer traveled to. Facts & Procedural History Mr. Houchin worked as a truck driver, but was unemployed in 2010. He collected unemployment compensation. Mr. Houchin also…
IRS Announces Significant Changes to Audit Process
The Large Business & International or LB&I division of the IRS recently announced significant changes to the way its IRS auditors gather information from taxpayers. These announcements were made by directives issued by the LB&I Commissioner to all LB&I agents, which makes it mandatory for IRS agents to follow the directives. Reasons for The Changes…
IRS De-Coordinates All Coordinated Issue Papers
The IRS de-coordinated its remaining Coordinated Issue Papers yesterday. This is the final step in the IRS ending its coordinated issue or tiered program. The IRS’s coordinated issue or tiered program was how the IRS was identifying and working challenging tax issues that presented compliance problems. Coordinated Issue Papers were instructions for IRS auditors on…
Car and Truck Expenses Allowed Based on Mileage Not Actual Costs, Absent Records
In Aivatzidis v. Commissioner, T.C. Summary Opinion 2013-105, the U.S. Tax Court concluded that a professional driver could deduct expenses based on mileage, but not for actual expenses. This case provides an example of why drivers should compute car and truck expenses based on mileage if they do not have sufficient records. Facts & Procedural…
IRS Closing Agreement Valid If Not Reviewed by Joint Committee on Taxation?
In AM 20133301F, the IRS addressed the validity of a closing agreement that was not submitted to the Joint Committee on Taxation or JCT for review prior to signing the agreement. Facts & Procedural History The taxpayer was an insurance company whose tax returns were being audited by the IRS. The IRS and taxpayer asked…
About IRS Appeals AJAC Project
The IRS Office of Appeals just released a memo describing its changes pursuant to its Appeals Judicial Approach Culture (AJAC) project. These changes do not really break new ground, but they address a few key issues that are often in dispute in appeals cases. About the IRS Office of Appeals The IRS Office of Appeals is…
Fashion Retailers Business Expenses Disallowed as Routine Substantiation Case
In Heinbockel v. Commissioner, T.C. Memo. 2013-125, the U.S. Tax Court considered a routine substantiation case and disallowed business expense deductions for a fashion clothing retailer. This case presents an opportunity to consider how to present routine substantiation cases to the IRS and to the courts. Facts & Procedural History Mrs. Heinbockel was in the…
Using Third-Party Statistics for Tax Deductions
If you remember the time before the widespread use of personal computers, you will understand this better than others. We live in a society full of data. It’s everywhere. And it’s growing in volume, scope, and utility. The explosion of data has allowed taxpayers to produce documents, documents, and more documents. But why? Documenting business…
Court Determines What Truck Driving Expenses Are Deductible
In Nolder v. Commissioner, T.C. Summary Opinion 2012-50, the U.S. Tax Court examined a number of different expenses incurred by a truck driver to determine which expenses were deductible. This case provides a good overview of the typical expenses truck drivers incur that are and are not deductible. Facts & Procedural History Mr. Nolder was…