Meal & Entertainment: The IRS Auditors “Bread & Butter”

I once worked with an IRS agent who would only make two types of adjustments. He would make UNICAP/inventory adjustments and meal and entertainment adjustments. If either of these items could be adjusted for a tax return, he would adjust them. It didn’t matter what else was listed on the tax return. It did not…Continue readingMeal & Entertainment: The IRS Auditors “Bread & Butter”

Can IRS Rely on Third Party Reports to Identify Taxable Income?

If a third party collects monies for you and send you a report reflecting the monies but the reports show too much income, should you be taxed on the higher income or what you actually received? The Ghadiri-Asli v. Commissioner, T.C. Memo. 2019-142, case addresses this. Facts & Procedural History The taxpayer is a physician.…Continue readingCan IRS Rely on Third Party Reports to Identify Taxable Income?

Court Considers Medical Marijuana Company Substantiation

Medical marijuana companies face a number of challenges. The Section 280E limitation on business deductions is one example. There have been a number of court cases that address this limitation. The Feinberg v. Commissioner, T.C. Memo. 2017-211, case addresses a medical marijuana company’s efforts to substantiate cost of goods sold in light of the Section…Continue readingCourt Considers Medical Marijuana Company Substantiation

Court Says Employer Entitled to Worker’s IRS Records

When the IRS determines that independent contractors are taxed as employees, it is up to the employer to show that the IRS determination is incorrect. One way to do this is to show that the workers paid tax even though the employer did not withhold the tax. In Mescalero Apache Tribe v. Commissioner, 148 T.C.…Continue readingCourt Says Employer Entitled to Worker’s IRS Records

How Long Do You Keep Your Tax Records?

Taxpayers often ask how long they have to keep their tax records. Many taxpayers only keep records for three to six years. In Reyonoso v. Commissioner, T.C. Memo. 2016-185, the court considered a case that turned on whether the taxpayer could produce records to support that he had made a mark-to-market election nearly twenty years…Continue readingHow Long Do You Keep Your Tax Records?

Limits on IRS’s Ability to Ask for Records Multiple Times

If the IRS conducts an audit for one year and reviews records, but fails to keep the records and then conducts an audit for a second year, is the taxpayer obligated to provide a second copy of the records the IRS failed to keep from the first year?  The court addressed this in United States v.…Continue readingLimits on IRS’s Ability to Ask for Records Multiple Times

Truck Driver Expenses Not Subject to Higher Substantiation

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…Continue readingTruck Driver Expenses Not Subject to Higher Substantiation

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…Continue readingTruck Expenses Not Deductible Due to Inadequate Mileage Log

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…Continue readingCar and Truck Expenses Allowed Based on Mileage Not Actual Costs, Absent Records

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…Continue readingFashion Retailers Business Expenses Disallowed as Routine Substantiation Case

Taxpayer Use of Estimates for Deductions

Can you use publicly available sources of statistical information when you have no records to support the amount of your expenses?  The court addressed this in Murray v. Commissioner, T.C. Summary Opinion 2012-66, which involved the IRS’s use of third party statics. Facts & Procedural History Mr. Murray worked as a truck driver for National Freight,…Continue readingTaxpayer Use of Estimates for Deductions

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…Continue readingCourt Determines What Truck Driving Expenses Are Deductible

Truck Driver Not Entitled to Deduct Meal and Supply Expenses

In Elsayed v. Commissioner, T.C. Summary Opinion 2009-81, the U.S. Tax Court reviewed meal and unreimbursed expenses incurred by a truck driver. This is a common tax problem for truck drivers. This case shows the difficulties truck drivers have in capturing and substantiating their expenses for tax purposes. Facts & Procedural History  Elsayed was employed…Continue readingTruck Driver Not Entitled to Deduct Meal and Supply Expenses

Truck Driver Not Entitled to Deductions When Records Destroyed

In Clark v. Commissioner, T.C. Memo. 2007-172, the U.S. Tax Court held that a truck driver who did not file tax returns was not entitled to deduct expenses where his records were destroyed in a fire. Facts & Procedural History  Mr. Clark was a truck driver. He was employed by Jimmy Harris Trucking, Inc., Vandy…Continue readingTruck Driver Not Entitled to Deductions When Records Destroyed