Re-visit Lack of Documentation

[rfk]

Want to know how much documentation is truly needed in light of the Cohan rule and/or per diem items (not needing receipts) that an employee has to pay for as required by the employer. If the client has no receipts to backup the items put on the return, how far can the Cohan and per diem "ticket" be used to fight in an audit for mileage, meals, and travel, etc. for overnight travel 76 times last year?

It is late and I may not be thinking that clearly about the tax law with regard to the client's lack of documentation for M&IE. I believe that lodging is not covered, but what about per diem for lack of receipts? Which code section should be looked at for these items?

Please advise.

rfk

[Bees Knees]

The Cohan rule cannot be used for all expenses. TTB page 5-8 cites T.C. Memo 2005-253 which did not allow the use of estimates in that particular case. The court said in part:

For certain types of expenses, such as those for cellular telephones, automobiles, and trucks, section 274(d) overrides the rule of Cohan. See Sanford v. Commissioner, 50 T.C. 823, 827 (1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969). Under section 274(d), a taxpayer must meet strict substantiation requirements before any of the listed expenses will be allowable. See also sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs. We may not apply the Cohan rule to those expenses covered by section 274(d). See Sanford v. Commissioner, supra at 827; sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).

I had an auditor allow the use of estimates for one of my clients. Even reasonable estimates for Section 274(d) expenses. It all depends on the reasonableness of the claimed deductions.

[DaveO]

If the employer will provide a letter stating that no reimbursements are made and you can document the overnight travel you shouldn't have any trouble with the perdiem.

[rfk]

Thank you Bees

Thanks for the info. I will check out that particular code.

rfk

[rfk]

Dave - Document

My client has a letter, but not All documentation. Situation is that the auditor allowed the expenses on the previous year, but is balking at the current year under audit. I am asking the auditor for consistency since this is what the auditor wants. The employer had provided a letter for the employee and the auditor allowed as I stated before.

rfk