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Copied from CPA Practice Advisor: CPA Loses Business Car Deductions in Tax Court Case The IRS requires taxpayers to follow the recordkeeping rules for T&E (travel and entertainment) expenses to a “t.” Otherwise, deductions may be denied. This lesson was apparently lost on a CPA in a new Tax Court case. He wasn’t allowed to deduct most of his business car expenses based on calculations from the MapQuest website. Notably, the CPA failed to keep a contemporaneous diary or log of his business trips to prospective clients. He didn’t create the records until a couple of years later (Kilpatrick, TC Memo 2016-166, 8/29/16). On the Schedule C for his 2009 tax return, the CPA deducted $22,331 in automobile expenses. He claimed they were expenses of driving 40,601 miles for his CPA business. But the IRS only allowed a deduction of $398 in its notice of deficiency. At trial, the CPA changed his tune, claiming he drove 8,687 business miles in 2009. Because he used the standard mileage method (55 cents per mile in 2009, the deduction amounted to $4,778. Although the recordkeeping requirements under the standard mileage method aren’t as stringent as the rules for deducting actual expenses, the CPA still must substantiate the following: The amount of business mileage for each business use of the automobile; The total mileage (business and nonbusiness) of the automobile during the taxable year The date of each business use of the automobile; and The business purpose of each business use of the automobile. To substantiate these automobile expenses with adequate records, a taxpayer must provide (1) an account book, log, or similar record and (2) documentary evidence (i.e., receipts, paid bills, or similar evidence) which, in combination, are sufficient to establish the following elements: the amount of mileage for each business use, the total amount of mileage (business and nonbusiness) during the taxable year, the date of each business use and the business purpose of each business use. The account book, log, or similar record must be prepared or maintained in a “contemporaneous manner.” A record maintained on a weekly basis may suffice. The CPA testified that all 8,687 miles that he allegedly drove for business were to attract new clients. He did not provide to the Tax Court any contemporaneous records of his business travel for 2009. In lieu of records, the CPA furnished a copy of a 2009 calendar, prepared in December 2011, and printouts of directions generated by MapQuest, also prepared in December 2011. The MapQuest directions showed the distance between his residence and various towns to which he allegedly traveled for business. The CPA wrote a list of dates on each page of directions, apparently to signify that he took trips on those days to and from the particular location on that page of directions. These dates are the same as the dates circled on the calendar. Both the calendar and the MapQuest directions were prepared at least two years after the CPA allegedly used his car for business travel in 2009. Therefore, they do not constitute “adequate records” for this purpose. Furthermore, due to the large gap in time between the alleged dates of business travel and creation of the records, the Court concluded they are not sufficient to establish the amount of business mileage, the date of the use and the business purpose of the use. Make sure your clients follow the recordkeeping rules for T&E expenses to the letter. And then, unlike the CPA in this new case, practice what you preach. The rules for auto recordkeeping generally require a contemporaneous log of each trip (there are a limited number of special exceptions). In Sam D. Kilpatrick (T.C. Memo. 2016-166) the Court found the taxpayer used a calendar and MapQuest to prepare a log at least two years after the business use of the car. The Court held that neither the calendar nor the MapQuest directions were "made at or near the time of the" use of the car. In addition, the calendar did not contain other required information such as the places, business appointments or the business purpose of the travel. The Court only allowed the deduction for auto expenses allowed by the IRS. On a second issue the Court disallowed deductions for office furnishings. The Court found the taxpayer did not elect Section 179 expensing. Thus, any deduction could only be through a depreciation deduction. But the Court noted that the furnishings were antiques (determined from where they were purchased and by the photographs presented) and that they would not be adversely affected by the passage of time or the taxpayer's use of them. The Court held that under the current depreciation rules, as under prior law, no depreciation deduction should be allowed for antiques.

COPIED FROM CPA PRACTICE ADVISOR: Tax return preparers also are subject to a number of penalties that are adjusted for inflation. These 2017 projected penalty amounts are shown below. Projected amounts for other penalties are included in the full report. Scenario Penalty Per Violation Maximum Penalty Failure to Furnish Copy to Taxpayer $50 $25,500 Failure to Sign Return $50 $25,500 Failure to Furnish Identifying Number $50 $25,500 Failure to Retain Copy or List $50 $25,500 Failure to File Correct Information Returns $50 $25,500 Negotiation of Check $510 No limit

Sounds like they need a new corporation and a tax-free merger. Find a good business lawyer.

I don't think so. When the home changes hands to the heirs, and they take possession of the home subject to the mortgage liability, that mortgage includes the interest that has accrued to that date. I don't think it is interest anymore, it is part of the debt that is being assumed by the heirs. Tom Newark, CA

The estate would deduct it if it's still in the estate. If the house has been passed out of the estate, then the new owners can deduct it if they don't already have a second home. I guess if they have a second home you could call it investment interest. Hopefully, it's still in the estate.

I love posts that are presented as facts but start by using the word "projected." and the source is not even the IRS. I have lived through the end of the world 26 times. Why not publish documentation when the IRS has levied any of the penalties? I have more important subjects to be concerned with. No one that would be eligible for all these "projected" penalties will be on this website.

Most of the scammers use internet based phone programs that spoof the phone number where the call is originated. They also spoof the IP address making it virtually impossible to track them. I have a group of friends that, when I get a call or some one of my clients gets a call that leaves a number, we all call them nonstop until they take that number out of action. This will reduce the possibility of someone gullible returning their call. I have had as many as 10 of us calling them non-stop.