During the process of providing tax preparation and tax planning services to our clients, we are constantly reminding them that the IRS requires that a contemporaneous mileage log book be maintained by them showing the odometer reading as of January 1 and December 31, and for each business trip, the date, mileage driven, and business purpose of the trip.
Lacking this documentation, the taxpayer is not entitled to a vehicle tax deduction. Tax deductions cannot be claimed by a taxpayer who simply says “I drove my car about 25,000 miles for business.” Although we have previously posted about this strict IRS substantiation requirement, we see each year that taxpayers often lose a valuable tax deduction simply because of their refusal to document the business use of their vehicle.
The U.S. Tax Court recently decided a case in favor of the IRS (T.C. Summary Opinion 2014-44 concerning Jason Daniel Abelitis and Jaime Ann Abelitis, taxpayers). This case is about taxpayers who claimed various tax deductions without ample support and documentation. During a six-year period, Jason Abelitis reported substantial business losses with respect to his mobile advertising business. The losses were primarily a result of car and truck expenses claimed by the taxpayer using the standard mileage rate. The Court agreed with the IRS that its determinations in a notice of deficiency are presumed correct, and the taxpayer has the burden of proving that those determinations are erroneous.
What we found particularly interesting about this case [Read more…] about LACK OF AUTO MILEAGE LOG RESULTS IN DENIAL OF TAX DEDUCTION AND IMPOSITION OF IRS 20% PENALTY
