Having accurate books and data requirements of all companies and individuals who seek to take income tax deductions. But in fact, companies and individuals can not have all the necessary documents and / or receipts to fully support each deduction them. With this in mind, as professionals we ask? – When can a food taxpayer, tax deductions
According to the American Institute of Certified Public Accountants (AICPA) professional standards, “unless prohibited by law or regulation, a person can use assessment taxpayers in the preparation of tax returns if it is not realistic to get the exact data and if the party believes that the estimates are reasonable based on the facts and circumstances known to the company. If the plans taxpayer are used, they should be presented in a way that does not involve more detail than. “In other words, , the food should look like and plan
For example, if the taxpayer company plans mileage to be 1,000 miles -. This looks like food. However, if the same taxpayer informs you that business mileage is 1,125 miles – this seems to be the exact number of
The basis of this position with AICPA professional standards is as follows -. “Accounting requires the use of professional judgment and in many cases, the use of approaches based on the assessment. The application of such accounting judgments, as long as not contrary to the procedures set forth by the taxation authority, is acceptable. These judgments are no plans within the purview of this statement. For example, a federal income tax regulations provide that if all other requirements for fall are met, the exact amount of income or expense does not have to be known or make sure at the end if the amount can be determined with reasonable accuracy. ”
By referring back to that mileage example preferably taxpayer would have annual mileage logs indicate the destination of travel, business purposes, the person (s) who passed the date and the number of business miles incurred. This mileage log must substantiate the number of miles companies that the taxpayer has driven it is likely that the IRS would accept this form data as support for mileage deductions taxpayers. Moreover, this evidence is important to defend the deduction of review. Lack of mileage log can cause a transition to the mileage deduction. For example, the Tax Court Case Christ v Commissioner, TC Memo 2001, the court found that “the taxpayer not produce any evidence substantiated claims vehicle expenditures. The Court also noted that the expenses will be recorded with books accounts, diaries, logs and other evidence . This lack taxpayer of any documentary evidence of expenditure in the Court’s approach to spending and eventually banned deductibility them. “
However, if you have insufficient documentary evidence IRS may allow mileage deduction in certain circumstances. Per IRS Publication 463, if you do not have complete records to support deductions, sampling can be an advantage. Specifically, the taxpayer can keep adequate records for the year, as detailed mileage log, and if the sample is representative of the business period of the year, the IRS probably will allow mileage deduction doubts.
With this in mind, it is clear that assessing tax deduction is allowed unless specifically in conflict with the procedures set forth by the taxation authority. But in any case, the planned deduction has to be supported by evidence to get tax benefits on the performance of the taxpayer. In other words, the estimated deductions that a taxpayer must make valid arguments and evidence to be a valid business expense.