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, we know what the taxpayer needs to provide to the IRS to sustain claimed tax deductions. For certain types of expenditures, the courts have occasionally ruled that estimates are acceptable. The courts have ruled in favor of the IRS that estimates for vehicle expenses and certain other types of expenses cannot be used.
Thus when we request additional support from a client to support a claimed tax deduction, it is with the best interest of that client and all of our clients that such support is requested. Complying with IRS rules and regulations minimizes the likelihood of an IRS audit and penalty assessments for understating the tax liability or intentionally ignoring IRS rules.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.
