I ran across a recent tax court case that reminded me of some of my clients. Garza v Commissioner is a story about a taxpayer who couldn't convince the IRS that his records substantiated his deduction for auto mileage.
It's not that he don't keep any records, he just wasn't disciplined enough to do it every day. At the end of each month, he made a note of the odometer readings at the end of each month, with occasional additional mid-month readings. But there was no other information relating to vehicle expenses. There was nothing recorded about any personal travel. His entire deduction for auto mileage of $20,085.50 was disallowed by the IRS and Garza took the IRS to the Tax Court.
He lost because he did not record the amount, time, or business purpose for each business use of his truck.
To paraphrase the court, "a taxpayer generally must maintain adequate records or produce sufficient evidence corroborating his own statement, establishing the amount, date, and business purpose of each expenditure or business use of [an automobile]".
So, my readers, don't let this happen to you.
- Mark S Gleason CPA
www.lakes-cpa.com
Posts to this blog are written by Mark S Gleason CPA, a tax practitioner with over 30 years of experience. It presents information about taxes relevant to small businesses and their owners. Mark has a JD from William Mitchell College of Law and is a member of the Community Faculty at Metropolitan State University where he teaches tax and accounting courses. Mark is a member of the MN Society of CPAs.
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