Get the IRS Tax Benefits You’re Entitled to and Avoid Tax Penalties by Documenting Your Business Expenses
Keeping a consistent and clear record of your business expenditures is not only good business practice; it will also ensure you to receive the full amount of tax deductibles to which you are entitled. If you use your car for your business, it is extremely crucial for you to keep a clear record of the mileages you drive for your business each time you use it.
Recently, a self-employed individual was denied mileage expense deductions due to poor record keeping.
CCH (http://tax.cchgroup.com/) reports:
Mileage Expense Deduction Denied; Penalties Imposed in Part
A self-employed individual operating a liquor marketing business was denied a deduction for mileage expenses because she failed to provide adequate records or sufficient evidence to substantiate the mileage. No records were produced that were prepared at or near the time the miles were driven. Although there was no doubt that she had traveled to various customer locations to update advertisements and displays during the year at issue, she offered only an approximate mileage list prepared four years after the events, and her own self-serving testimony.
The penalties for failure to timely file and pay were imposed since the individual failed to establish a reasonable cause defense and the IRS prepared a substitute return. The penalty for failure to pay estimated taxes was not imposed because the IRS failed to provide evidence to show the required annual payment; the IRS provided no evidence regarding whether the individual filed a return for the prior year and, if she did, the amount of the tax that was needed to determine the required annual payment for the year at issue.
Good record keeping is healthy for your business as well as ensuring your entitlement to IRS tax benefits. It’s also a good idea to keep multiple copies of important documents such as business expense records so that you will not lose all of your important files in unforeseeable disasters.
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