ROUND NUMBERS: PLEASE AUDIT ME
Overuse of Round Numbers
Increases Likelihood of an IRS Audit &
Assessment of Penalties
While most taxpayers are diligent about maintaining documentation and support to substantiate their tax deductions, there are always those who believe that complying with IRS rules is too much trouble and look for the easy way. An example would be when computing the mileage information for the business use of the family automobile. The IRS requires that a contemporaneous (real time) mileage log book be maintained by the taxpayer showing the dates of business travel, the business purpose for the travel, the mileage for that business trip, as well as the odometer readings as of January 1 and December 31 of the tax year. When the taxpayer informs us that the automobile was driven 20,000 miles and 18,000 miles were related to business travel, the beginning mileage was 10,000 miles and the December 31 mileage was 30,000, such information reeks of estimates and guesstimates which the IRS does not allow. The IRS rules are quite simple – if the taxpayer does not maintain a contemporaneous mileage book, no vehicle expense deduction is allowed.
Based on years of experience with dealing with IRS audits, [Read more…] about ROUND NUMBERS: PLEASE AUDIT ME