Posted on 10/12/2011 10:18:17 AM PDT by celticfreedom
Just received a letter from the IRS informing me that I am being audited on my 2009 return. They are looking into the amount of mileage I claimed (it was 18,000). I have already pulled all my assignments for that year and included the round trip mileage for each location, copied the part of my contract with the nursing agency I work for that states I am responsible for my own travel expenses and had the garage print out a list of all repairs and oil changes, etc...on my vehicle for that year, have tracked down my gas receipts...Is there anything else anyone can think of that I may need? I only want to have to do this ONE time! Thanks in advance for any and all advice.
“..either you claim the IRS allowed mileage rate, OR your actual expenses...you can’t do both...”
I only claimed my mileage. Was just wondering if I should present all expense receipts...or just the proof of mileage.
Hello?
The guy seemed to say that this was a business expense. (And you might have pointed out that in most cases these are only deductible to folks who itemize deductions. I also assumed the guy was itemizing because otherwise there's no place there's no place to list transportation expenses as I recall. An accountant does my taxes so I never look at the forms anymore.)
ML/NJ
I’ve always heard you shouldn’t go yourself. Just send the lawyer.
Just make sure you have a well worn “mileage book” that documents all your miles.....it’s easy to make one up...spilled coffee really helps.
Then you should get to deduct (IIRC) $0.51 per mile. That’s probably higher than the actual gas and repair costs you paid, and it’s a LOT easier to work with.
I wouldn’t recommend the actual receipts for gas/repair since they CAN argue that not all the gas was used for work, that some of the repairs were because of personal use, etc.
But the code is quite explicit - you can claim X amount per miles traveled. So stick with that.
I am not a tax attorney or accountant, and I didn’t sleep at a Holiday Inn last night, but I’ve been an independent contractor quite a bit in the past and have gone around with the IRS a few times. I was told to “take the easiest accounting method” by several reliable sources because it limits the options the IRS has for doubting your claims.
Take the mileage.
Never take extra documentation that doesn't pertain to the actual audit issue. They're not looking for expenses, don't provide them. Provide only the mileage data.
“I only claimed my mileage. Was just wondering if I should present all expense receipts...or just the proof of mileage.”
Just show your mileage book or notes and the documentation as to why you have so much mileage and why you can claim it in the first place. If you don’t have a mileage book or notes, consider making one up. Be sure to use different pens and pencils, wrinkled paper, coffee stains, etc.
From what you stated, it sounds like you’re a bona fide independent contractor and must have used Form C for the mileage deduction, and had to pay your own half of social security, etc.
If all of the above is the case, I wouldn’t think you’d have much problem. But the absolute key if you meet with these people is DO NOT say anything else at all about the rest of your return or past returns. NOTHING! At this point, they have only the right to delve into the mileage issue and NOTHING ELSE.
If they try to lead you in any way to any other subject, just say that you’re sorry but you’re not prepared to deal with that at this time. Just keep repeating that. And for goodness sakes, DO NOT VOLUNTEER ANY OTHER INFORMATION. NOTHING! Keep your mouth shut. No idle chit-chat, no niceties, no personal information, no nothing. Just answer the questions, show the supporting documents and say and do nothing else. Oh, and take just the supporting documentation for the amount of mileage, why it was necessary to have that much mileage, etc. and NO OTHER DOCUMENTS! DO NOT BRING UP PAST YEAR’S TAXES EITHER!
I’ve also heard it’s best not to meet with these people in their office or at your home, that a neutral location is best. Not sure how true that is though.
I am an independent contractor. I work at the same 15-20 places and have done so for the past eight years.
I keep track of the miles from my house to those locations and code just those miles and tolls.
I only use the one card for business, and hardly anything else. I drive so much, I let my wife drive for “pleasure” stuff. In the end it comes out to about 90% of the miles driven each year.
The proof is that, as a photographer, I cannot shoot the event if I am not there....
I agree with the other posters here. The only additional documentation you should be taking is any additional mileage (trips) that you forgot to include in the first go round (or maybe any tolls, parking fees, etc. that you might have not realized you could claim). If you can substantiate not only the miles you deducted but a few more, they might just want to drop the whole thing, rather than have you file again to get $$ back from them.
As far as “re-creating some lost documenation” be sure you don’t do it by purchasing a new undated calendar and trying to use that. Some have small copyright notices that indicate the year it was printed, and if it is after 2009 you are FUBAR’d!
The individual didn’t claim that much mileage. I think insurance companies figure 15,000 as an average. It looks like a random selection to me. The situation doesn’t merit a high dollar per hour tax lawyer.
If I was the auditor, a tax attorney showing up for something this minor would be a red flag. I would wonder if there were other problems and possibly concealed income considering a worthwhile tax attorney would want a retainer upwards of $5,000 to start.
If you customarily use someone to prepare your taxes and they show up, I don’t think the IRS would think twice. Someone as expensive as a tax attorney puts things in a different and IMO opinion, very bad light.
Only give them what they ask for..nothing more...I assume you have a diary/appt book..where you should log you miles every day...that’s all you have to give to them..
I am a tax preparer.
You can claim standard mileage or actual expenses. You will probably come out much better using standard mileage with 18,000 business miles. If you used standard mileage the first year you put this vehicle in service for business, you can use standard or actual mileage in later years for that vehicle. If you used actual mileage the first year you put this vehicle in service, you must use actual mileage in later years for that vehicle.
You must document all of your vehicle expenses. For standard mileage, record your odometer reading on Jan 1 each year so that you can compute total miles. You must also keep a log of of the dates, purpose, and miles traveled for business use and miles traveled for commuting. It is also a good idea to keep maintenance records that have the odometer reading such as oil changes.
The IRS is getting a lot stricter on business vehicle expenses.
The IRS knows that you are fudging the mileage number because you made the mistake of using a round number like 18,000. You are less likely to receive an IRS letter if you use a number like 18,357. Is this the actual number of miles used for business or is this a guess pulled off the ceiling? I just finished an offseason tax class on vehicle expenses. Round numbers used for standard mileage was pointed out as a reason for the IRS to flag a return.
If 18,000 is the actual business mileage and you have documentation to prove it, you have nothing to worry about. Otherwise, the IRS will disallow your standard mileage and you will have to pay back some money plus a penalty.
I hope this helps.
First, the pretty good news:
If you had a tax preparer (CPA) do your form and sign off on it you can have him/her attend the audit and you can sit it out. You basically give them a limited power of attorney that lets them speak for you only about the year in question. That eliminates any fishing expeditions that the auditor may wish to undertake were you present. The other point being that people tend to babble on during the audit and disclose far too much information, by having your preparer be your proxy you don't even have to be there. If you did your own forms or had H&R Block or similar that will not be an option and you'll have to appear. Just remember to keep nervous chatter to an absolute minimum.
Now the bad news:
Once you've been audited you can expect another audit next year and the year after. The IRS works on the theory that if they audited you it had to be for a reason and even if they didn't find anything with the first audit, it's always worth another look. It stops with the third audit because there is a law on the books that is designed to prevent "harassment" and so you are finally off the hook.
It happened to me back in the 1980's and I had my accountant attend for me and they never collected an extra dime although I did have a bills from my guy for his time expended. I don't think that IRS policy has softened much on their audit practices over the years. From their POV everybody cheats and their job is to maximize the revenue stream collected.
Good Luck,
GtG
For all out there I am hearing more audits this year than I ever heard from Middle Class people in my life, be very carful out there.
If so answer only questions asked and don't discuss other areas. Sometimes, it could lead to other issues or years.
You didn't mention whether you filed Schedule C or deducted as employee expense on Form 2106 subject to 2% limit.
You may wish to visit the irs.gov site and review the IRS audit manual for typical procedures.
Depending on the dollar audit exposure, you may wish to consult with a CPA that is familiar with IRS audits (a tax attorney is overkill unless it is criminal or there is a court case). A CPA would have a technical knowledge at or above the level of the IRS agent. Some taxpayers have been intimidated in dealing with IRS. An independent review by the CPA could be helpful before dealing with IRS.
You may wish to determine if this is a random audit or is targeted to a specific industry. The IRS is currently looking at independent contractors who should be classified as employees.
So you may have more exposure than what the audit letter is asking for.
My ACTUAL mileage for the year was 21,397. Foolishly I took advice from a co-worker who said to round it to a lower number because the real mileage would draw attention!
My ACTUAL mileage for the year was 21,397. Foolishly I took advice from a co-worker who said to round it to a lower number because the real mileage would draw attention!
January 30, 2005 Contact: Bob Schulz
For Immediate Release (518) 656-3578
U.S. Court of Appeals Rules IRS Cannot Apply Force Against a Tax Payer Without A Court Order
Taxpayers Free To Ignore An IRS Summons Queensbury, NY – On January 25, 2005, the U.S. Court of Appeals for the Second Circuit held that taxpayers cannot be compelled by the IRS to turn over personal and private property to the IRS, absent a federal court order. Quoting from the decision (Schulz v. IRS, case number 04-0196-cv), “...absent an effort to seek enforcement through a federal court, IRS summonses apply no force to taxpayers, and no consequence whatever can befall a taxpayer who refuses, ignores, or otherwise does not comply with an IRS summons until that summons is backed by a federal court order…[a taxpayer] cannot be held in contempt, arrested, detained, or otherwise punished for refusing to comply with the original IRS summons, no matter the taxpayer’s reasons, or lack of reasons for so refusing.”
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http://whiz.to/~papera/Articles/IRS%20Summons.html
“If you...examined [The 16th Amendment] carefully, you would find that a sufficient number of states never ratified that amendment.” - U.S. District Court Judge James C. Fox 2003.
Go to YouTube and search:
“Never talk to the police”
Watch and follow the advice this law professor gave when the IRS wanted to meet someone to go over his taxes.
That may resolve it right there. IRS agents are lazy and unless there is a lot of money involved, you just aren’t worth the effort.
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