No mileage log

[rfk]

I have an audit client who did not keep a mileage log, and does not appear at this point to be able to put one together because of own circumstances. It may appear that the mileage is legit but the person just did not keep adequate records.

Since this person may not be able to produce this information, what wise words of wisdom do I work with to possibly get to first base with the auditor, if at all! I do see this as a lost cause, but I want to see if there is something I am missing.

Thanks.

rfk

PS: I know in the end the tax year in question is going to open a can of worms because of the circumstances of the self prepared (Turbo Tax) return. There are quite a few questionable deduction amounts, and I think this is going to affect the other two returns -- before and after tax years.

[Uncle Sam]

No mileage log

Okay - does the client have vehicle repair bills - that usually note the mileage.True - that by itself is not going to establish business mileage - but it can at least establish total mileage for a given period.
What the client CAN do is to go to one of the internet sites to get directions from where he normally starts from to the destination - that provides the mileage distance. - aaa, mapquest. Also - if a toll-pass account was used, that can establish frequency of travel to specific destinations.
I did this for a correspondence audit a couple of years ago - and IRS accepted 100% of what we provided.

[erchess]

I Agree

totally with Uncle Sam about the Mileage except that OP doesn't seem to think reconstruction is possible and he indicates that there are other problematic deductions on the TT return.

I think what you have to do is prepare for each line that had or should have had a number figure out what should have been on that line and fasten together records such as canceled checks or receipts or copies thereof along with a tape where you have added them up and an unambiguous label for the bundle such as "Sch A Line 13". Then you either go to the audit with these say in a large box or boxes perhaps on a hand truck if there are enough or you mail them in along with a detailed letter of explanation. In my experience the auditor will want to do his or her own calculation of the total change in the return so I would not submit or take an amended return. While I have never personally needed to take a revised form or schedule to an audit perhaps there could be circumstances where one would be helpful.

[OtisMozzetti]

comments about mileage

...
I have an audit client who did not keep a mileage log, and does not appear at this point to be able to put one together because of own circumstances. It may appear that the mileage is legit but the person just did not keep adequate records.
...

The client, with your assistance, may be able to reconstruct the numbers of visits, and preferably the dates, to particular locations for business purposes. If the result of that is convincing substantiation in the eyes of the IRS examiner, it will accomplish your client's goal. As an aside, please note that I sometimes look through the decisions accessible via opinion search at www.ustaxcourt.gov; and that court seldom accepts reconstruction of Schedule C or employee business expense mileage.

Remember to think not only about the numbers, but also about the overall deductibility of the mileage, i.e. is it away from the tax home? is it considered commuting? etc.

Finally, you say that the client "may not be able to put [substantiation] together because of own circumstances". This client's "own circumstances" right now are that this client needs to put in the effort--even though it is a substantial effort--to substantiate as much as possible of this expense, because there are a lot of interest and penalties at stake, and because examinations of other years will likely be required if the client cannot become adequately convincing to the IRS about the year currently at issue.

EA in California

[OtisMozzetti]

look what U.S. Tax Court did with a Hummer mileage log

If you go to www.ustaxcourt.gov and look under opinion search for opinions issued today, on June 8, 2009, there is the case of Lisa & Brian Simonette vs. IRS, TC Summary Opinion 2009-90.

Mr. Simonette operated a tax preparation and advice business and reported business mileage by pressing buttons into an electronic system in his Hummer. Apparently he needed to transfer the data accumulated in the Hummer system into his laptop computer. The court decision found some flaws in the recording process, and therefore threw out all of his business mileage.

[Zee]

I know nothing about this software, but it looks interesting and might be helpful to reduce the time/effort involved in reconstructing a mileage log. It appears to be a product that utilizes mapping to determine mileage. You might want to take a look:

http://www.bizmile.com/Press.html

[Gretel]

Maybe it has more to do with the Hummer than with anything else?

[JohnH]

That's an interesting site. I plan to take a closer look at it and maybe send links to a couple of clients. (But I wish they would run a spell-check and get the word "Testimonial" spelled correctly on their home page).

[rfk]

Thanks for the input

In speaking to the client today, she agrees that the record keeping was pretty dismal with regard to supporting docs. There are statements, but no receipts to tie back to what the cost represented. The credit card statements just show amounts but not relevant descriptions for a total understanding. And without receipts, how do you match to what the cost was for. You question in your mind items from 12 months plus back.

The argument has to be that this person is self employed with applicable reasons for expenses. Thus, the expenses are not created just for joy; they had a legitimate purpose. I just have to prove to the auditor that this was indeed the situation.

When she put the numbers onto the return I do not think that she tallied the amounts before doing so. She may have just entered numbers which "seemed" to have been the cost for her situation or category, but not understand the concept behind the expense nor the basis for it. Therefore, she is resigning herself to the fact that she may owe. But I am going to try my best to work with the situation at hand.

Thanks all.

rfk

[BHoffman]

Does the client have an appointment book she can go through to figure out who she met with and where? Did the client bill the customers after providing services, and would that help determine at least some mileage? I use Yahoo maps to determine miles for moving expenses sometimes.

It is dull and time consuming work to reconstruct a mileage log. Perhaps the client feels she would rather just pay the IRS. Did she report a lot of mileage?