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Why Keeping Records up to Date is Key

In late August, a taxpayer named Suresh Hatte went to the tax court in regards to his 2014 and 2015 tax returns. Hatte received a note of deficiency in 2018 for large deductions in regards to car expenses/mileage. A note of deficiency is issued when the IRS concludes a taxpayer’s return is not sufficient with the records of the IRS.

Instead of keeping records of his businesses, Hatte decided to create spreadsheets of mileage from the trips, after the fact. It was clear the spreadsheets were made after the fact because Hatte did not specify which of his cars were used or where each of the trips started. Additionally, the spreadsheets followed similar patterns in 2014 and 2015 (the tax returns of interest).

Eventually, when Hatte was confronted with the inconsistencies of the spreadsheets, he admitted that certain mileage on specific dates could not be accurate. In the end, the court denied Hatte the deductions due to a lack of evidence. Hatte will have to refile returns for the years of interest and pay penalties.

What’s the Takeaway?

It is the taxpayer’s responsibility to have sufficient proof of business expenses. It is in the best interest of taxpayers to have a professional accountant help them keep their records up to date. Lastly, QuickBooks Online is a great collaborative software for accountants and small business owners to keep track of the owner’s books. QuickBooks can even link up your bank accounts to the bank feed for easy bookkeeping.

What’s the New Tax Scam to Date?

The IRS is warning taxpayers to avoid agent impersonators demanding gift cards to pay fake tax bills. Always remember the IRS always mails tax bills to taxpayers unless there are special circumstances.


Learn more about Hatte’s case.

Additionally, Learn more about this newest scam from Ted Knutson.

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