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Car Expenses - More Warnings
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This entire site is for educational or informational purposes only. You are not to use the forms, concepts, strategies, or knowledge without assistance from a professional. The author, the corporation, the ISP, Bob Parrish CPA, Bob Parrish CPA, P.C. or other parties related to those or this site do not guarantee or warrantee in any manner the suitability, usefulness, accuracy, timeliness, or results of any portions of this site, nor the links contained in this site which link to other areas. At times, information is taken from other sources and is believed to be accurate, but no verification or confirmation is performed. Furthermore, if any federal or state law invalidates a portion of this disclaimer, the other portions still apply. In addition, any allegations or actions are restricted to arbitration only and must be arbitrated by the Better Business Bureau in Sarasota Florida. Reading of these pages constitutes complete acceptance and agreement with all disclaimer provisions on all pages of this site. .......
Thursday, February 22, 2007 11:45 AM
Law (commentary and citation)
Regs (commentary and citation)
Cases (commentary and citation)
§§§ Law §§§
§274(d)
§§§ Regs §§§
§§§ Cases §§§
This is about Activity Based Taxplanning - maximizing deductions, minimizing cash outlay and maximizing the amount of cash retained and the net worth.
Tax is a subject that many view in order to cut costs. Taxes are a cost just as any other cost. It happens this cost is somewhat intangible and is defined by legislation without a tangible item to view and control. The money is spent and the control of the expenditure is more appropriately administered by someone trained in the law.
This is about Activity Based Costing - methods to cut costs, management accounting, management information systems, decision support systems - in general about being a manager.
Entrance Interview
Exit Interview
From Banking Records
From Customer Records
From Signed Documents
From Your Other Business, or Financial Records
From Corporation or Organization Records (meetings, etc.)
What to do:
Protect Your Tax Deductions –
Car, Travel, Meals & Lodging
Summary
Each
person claiming a tax deduction is required to prove the deductions are valid.
If the tax return is examined, the deduction must be proven. The Internal
Revenue Service examining agent will use the Internal Revenue Service guidelines
for judging whether the deduction should be allowed or disallowed. The following
are a summary of the Internal Revenue Service guidelines. The Internal Revenue
Service rules change quite frequently. At this time, the taxpayer is allowed to
take a sample of the business use, as long as the taxpayer can prove the sample
is typical for the entire tax year. Documents such as appointment calendars,
invoicing, delivery tickets and audio tapes used to record the mileage diary are
items that offer assistance in the recordkeeping.
If
you claim more tax deductions than the Internal Revenue Service expects the
average person to claim, prepare yourself for an audit of your tax return. If
the mileage you claim computes to a very large deduction, then you must
anticipate the Internal Revenue Service will demand that you prove the deduction
is valid. You may have to prove the validity before the irs issues the refund.
You may receive a refund or the return may be processed as you filed it. Then
the Internal Revenue Service will request proof up to three years after the
return is filed. the Internal Revenue Service will then not only charge you the
tax, it will add penalties and interest. you can expect the interest and the
penalties to be very large. Expect it to double the tax savings.
If
the irs proves that you knew or should have known the deductions were not
documented, then expect more penalties and perhaps criminal penalties.
A
taxpayer must have evidence for each deduction shown on the tax return.
The deductions must be in writing.
Car
The
method for defending the business use of car or other business property is
generally the same as that for substantiating travel and entertainment expenses,
although alternative methods are also available in certain circumstances. In
general, a taxpayer must substantiate each element of an expenditure for the use
of listed property by adequate records or by sufficient evidence corroborating
his own statement.14
An adequate record substantiating the business/investment use of listed property
must contain sufficient information as to each element of every
business/investment use. However, the level of detail required may vary,
depending on the facts and circumstances. For example, a taxpayer who uses a
truck for both business and personal purposes and whose only business use of a
truck is to make deliveries to customers on an established route may satisfy the
adequate records requirement by recording the total number of miles driven
during the tax year, the length of the delivery route, and the date of each
trip. The date of each trip must be recorded at or near the time of the trip.
Alternatively, the taxpayer may establish the date of each trip with a receipt,
record of delivery, or other documentary evidence.
The
following five elements to defend against the Internal Revenue Service attack on
an expense relating to the tax deduction for car expenses:
·
the cost of the listed property and other items such
as repairs and maintenance;
·
the dates of use;
·
the name of the user;
·
for a vehicle, the number of miles driven, or amount
of time the property, other than property constituting a means of
transportation, was used – prepare a log showing the date, the departure
location, the destination, the business purpose, the miles for the trip, (an
invoice to your client, a calendar, court records, hospital or clinic records or
other documents relating to the trip can be used in place of the logbook; and
·
the business purpose of the use of the listed
property.
·
If you want to claim actual expenses instead
of mileage you must have in your files, canceled checks, paid bills and any
other document that will prove the amount of the expenditure, prove the date,
prove that is was used on the car you used for business, prove that it was paid
for by you
Travel
– Meals – Lodging
The
strategy to bullet proof your tax deductions relating to these items is to keep
on file paperwork that will prove to the Internal Revenue Service the same items
as with car expenses paid:
·
If you want to claim actual expenses instead
of per diem, you must have in your files, canceled checks, paid bills and any
other document that will prove the amount of the expenditure, prove the date,
prove that is was used on the car you used for business, prove that it was paid
for by you. NOTE: Any single item
(expenditure) less than $
The
Internal Revenue Service has a provision to use a standard daily rate for travel
expenses. However you must prove
you were away from home overnight for business to claim deductions regardless of
the method you use – that of
actual
expenses or use of the standard per diem rates.
You
can establish where you were by use of receipts for lodging.
You can establish business use by proving you were contacting other
persons relating to your business:
1.
Seminars – attendance records, etc.
2.
Calling on customers, or prospective customers
3.
Calling on suppliers or prospective suppliers
4.
Making deliveries or picking up items relating to your business
Assistance - What to do
Forms - Checklists - Etc.
Financial Statement Presentation
Notes to Financial Statements
How to Make Entries
What Kind of Records to Keep
Bookkeeping Methods - Cash, Accrual and Other
How the Business Entity Affects the Recording
Sole Proprietor
Corporation - C & S
Partnerships - General, Limited, Limited Liability Company, Registered Limited Liability Partnership or Company
Trusts
Tax Exempt
Compliance Checklist
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Alerts & Dangers - Risks
Asset Protection
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