What would you do...

[AccTaxMan]

Another what you would do question.

Taxpayer has an internet retail business. Her son and daughter in law help out. In 2010, her son and daughter in law used their credit cards to pay for most of the expenses. Taxpayer withdrew cash from the bank account to reimburse them sometimes in different amounts. So she has no record of exactly how much has been reimbursed during the year. Her son and daughter in law also live in her home for free so they were also partly reimbursed in the form of free rent, utilities and foods.

They are Asians and they said it is the Asian way to handle a family business.......everything is kind of lumped together.

How would you handle this situation?

[Burke]

The cash withdrawals from the bank account would have to be supported with receipts in order to deduct those. In fact, he really needs receipts for the cc payments to vendors as well. The cc bill is not sufficient. So he needs other documentation for anything to be deductible.

[AccTaxMan]

The cash withdrawals from the bank account would have to be supported with receipts in order to deduct those. In fact, he really needs receipts for the cc payments to vendors as well. The cc bill is not sufficient. So he needs other documentation for anything to be deductible.

If the clients insist to claim the deduction even after I have explained to them the requirements and the potential problem because of the missing receipts, would I be possibly in trouble down the road?

[JohnH]

Another what you would do question.

Taxpayer has an internet retail business. Her son and daughter in law help out. In 2010, her son and daughter in law used their credit cards to pay for most of the expenses. Taxpayer withdrew cash from the bank account to reimburse them sometimes in different amounts. So she has no record of exactly how much has been reimbursed during the year. Her son and daughter in law also live in her home for free so they were also partly reimbursed in the form of free rent, utilities and foods.

They are Asians and they said it is the Asian way to handle a family business.......everything is kind of lumped together.

How would you handle this situation?

How would I handle this situation?

If they can't provide proper documentation, I'd tell them maybe they need an Asian tax preparer.

[erchess]

ouch

What is needed besides credit card receipts or bank check records?

I would have said that the fact the expenditures were made and were for the business was sufficient to deduct them no matter who paid them.