Car expenses

[Questionguy101]

If your client cannot or refuse to provide you with the mileage log (even if he tells you he has it at home), you cannot claim car expenses for him. Am I correct?

[geekgirldany]

What reason has he given for not wanting to give you the log? If he refuses to give it to you then I would not claim the car expenses... myself I would not prepare the return as I would have to know the reason why he fails to provide it to me. If he is hesitating on that then what else is going on he hasn't told you.

If there is not one that is a different story. He would need to create by showing the appointments he went to and also backed up with maintenance records for the auto.

[taxea]

In the case of mileage logs I agree with geekygirl....no ticky no washy...tell your client that you are not willing to jeapordize your status with the IRS or have to pay a penalty. The IRS requires a mileage log, if he can't or won't produce it don't expense it. Along with that has he given you the total year miles, and total business miles figures. The only other thing you can do is take actual expenses if he took mileage in the first year. Show him the difference in the two figures and he may take the time to create a log from his appointment book.

[Traveling EA]

car expenses

I don't 'audit' car expenses. If a client has expenses and tells me he has a log and I don't see the actual log - I am not going to refuse to put the miles on the tax return. However, I remind them of the requirements. About 95% of my clients come in through the mail or e-mail. I don't meet many face to face - I give them a call regarding the mileage log requirement.

[dkss]

My engagement letter states I do not audit their records and they need to have all receipts and applicable logs. I do not have to see the log - I just ask if they have one. I will take mileage if they have their mileage info wrote on their business summary sheet. If they stand before me and pull it from thin air (or the ceiling), I would not take it.

[FEDUKE404]

Trying to be reasonable

In the case of mileage logs I agree with geekygirl....no ticky no washy...tell your client that you are not willing to jeapordize your status with the IRS or have to pay a penalty. The IRS requires a mileage log, if he can't or won't produce it don't expense it. Along with that has he given you the total year miles, and total business miles figures. The only other thing you can do is take actual expenses if he took mileage in the first year. Show him the difference in the two figures and he may take the time to create a log from his appointment book.

The Form 2106 et al only asks two relevant questions: 1) Do you have evidence to support your deduction? and 2) If yes, is the evidence written?

I fail to see how I am jeopardizing anything when the client gives an affirmative answer to both direct questions and then provides the necessary details. From another point of view, what do you do if the client says "Yep, here are my weekly reports!" - - - whip out the old calculator (and now scanner!) to deal with 52 more "pieces" of information??

Do you ask for a birth certificate to establish DOB? Do you ask for a marriage license to establish marital status? Do you ask for all those little pieces of paper when prescriptions are refilled? How do you handle things like six months in a residence, or a student where "full-time" or "less than five months" is an issue...require time-stamped photographs??

My job is not to audit a client. For reportable documents, doggone right I need to see them, and I insist on eye-balling things such as property tax bills and (generally) contributions receipts. But the responsibility for the overall accuracy of the return rests with the client. So long as I have shown reasonable due diligence, either by asking relevant questions or providing tax guidelines to the client, I see no reason to break out the polygraph.

FE

[Traveling EA]

The Form 2106 et al only asks two relevant questions: 1) Do you have evidence to support your deduction? and 2) If yes, is the evidence written?

I fail to see how I am jeopardizing anything when the client gives an affirmative answer to both direct questions and then provides the necessary details. From another point of view, what do you do if the client says "Yep, here are my weekly reports!" - - - whip out the old calculator (and now scanner!) to deal with 52 more "pieces" of information??

Do you ask for a birth certificate to establish DOB? Do you ask for a marriage license to establish marital status? Do you ask for all those little pieces of paper when prescriptions are refilled? How do you handle things like six months in a residence, or a student where "full-time" or "less than five months" is an issue...require time-stamped photographs??

My job is not to audit a client. For reportable documents, doggone right I need to see them, and I insist on eye-balling things such as property tax bills and (generally) contributions receipts. But the responsibility for the overall accuracy of the return rests with the client. So long as I have shown reasonable due diligence, either by asking relevant questions or providing tax guidelines to the client, I see no reason to break out the polygraph.

FE

I agree 100%

[DexEA]

In response to the Form 8867 you said:

I send the form pages to the client, have them answer the questions and sign/date the final page. When they send the completed form back to me I input the information they supplied. This way I have documentation that all the answers came directly from the TP.

If it's good enough for the EIC why not do the same for the 4562?

In the case of mileage logs I agree with geekygirl....no ticky no washy...tell your client that you are not willing to jeapordize your status with the IRS or have to pay a penalty. The IRS requires a mileage log, if he can't or won't produce it don't expense it. Along with that has he given you the total year miles, and total business miles figures. The only other thing you can do is take actual expenses if he took mileage in the first year. Show him the difference in the two figures and he may take the time to create a log from his appointment book.

[Questionguy101]

What reason has he given for not wanting to give you the log? If he refuses to give it to you then I would not claim the car expenses... myself I would not prepare the return as I would have to know the reason why he fails to provide it to me. If he is hesitating on that then what else is going on he hasn't told you.

If there is not one that is a different story. He would need to create by showing the appointments he went to and also backed up with maintenance records for the auto.

I may not have worded it well enough. I dd not mean they refuse to show it to you with a straight face.

More often than not, the situation is like this. You explain the mileage log requirement to a client. He says he understands. You ask if he has kept the mileage log. He says yes and he has it at home. At that point, do you insist that the client should go home and bring the mileage log to you before you will claim the car expenses for him? or just his affirmation that he has it at home is enough for you to proceed?

Or another situation: you explain the mileage log requirement to a client. He says he understands. You ask if he has kept the mileage log. He says no. Then you explain to him if he wants to claim car expenses, he should spend time to reconstruct the mileage records. He says yes and he will do it. At that point, do you insist that the client should first reconstruct the mileage records and show it to you before you will claim the car expenses for him? Or just the promise that he will do it is enough for you to proceed?

[Traveling EA]

I may not have worded it well enough. I dd not mean they refuse to show it to you with a straight face.

More often than not, the situation is like this. You explain the mileage log requirement to a client. He says he understands. You ask if he has kept the mileage log. He says yes and he has it at home. At that point, do you insist that the client should go home and bring the mileage log to you before you will claim the car expenses for him? or just his affirmation that he has it at home is enough for you to proceed?

Or another situation: you explain the mileage log requirement to a client. He says he understands. You ask if he has kept the mileage log. He says no. Then you explain to him if he wants to claim car expenses, he should spend time to reconstruct the mileage records. He says yes and he will do it. At that point, do you insist that the client should first reconstruct the mileage records and show it to you before you will claim the car expenses for him? Or just the promise that he will do it is enough for you to proceed?

His affirmation on both questions are enough to proceed. You have explained the law to him. There is not a need to see the physical evidence. Leave that to the IRS agents if and when they audit. As Duke said, do you ask for birth certificates, marriage certificates etc? Do you verify that the employer listed on the W-2 is truly an employer and not a W-2 that someone has purchased software to make? I document when and what the coversation was regarding to the mileage, contributions, etc so if they are to get audited by the IRS and the client says I never told them, I have my documention that we discussed the topics.

[geekgirldany]

Okay well I probably misunderstood. I thought he was saying "yeah but you can not have it"

I will tell you how I do it and it may not go with how others do it. First time clients I always ask to see a mileage log if claiming the mileage deduction. If actual expenses, I ask to see receipts. I explain the law to them every year and they sign my engagement letter that states they are responsible for the records if ever audited. Going forward I ask if they are keeping their log book. If I get a yes then I get the mileage for the year. If no I tell them to reconstruct it. I don't look at them after the first year unless they bring the log with them.

If a new client upfront tells me that they have no mileage log, I tell them to recreate and bring me it to me to see. If they will not do it then I will not take the mileage deduction. I had a new client this year that I knew had deductible mileage but no log book. I explained the law and they decided not to take the deduction. For me I feel like I have to see something that they are documenting mileage. I think that answering no to documentation questions is asking for a audit and I would rather not deal with that.

[Super Mom]

I don't 'audit' car expenses. If a client has expenses and tells me he has a log and I don't see the actual log - I am not going to refuse to put the miles on the tax return. However, I remind them of the requirements. About 95% of my clients come in through the mail or e-mail. I don't meet many face to face - I give them a call regarding the mileage log requirement.

That has always been my stance. However, upon taking the circular 230 course in December, I understand that as we must see one to avoid possible penalties. Therefore, I will expect everyone to show me one this year.

[mactoolsix]

Super Mom: Can you provide the section

That has always been my stance. However, upon taking the circular 230 course in December, I understand that as we must see one to avoid possible penalties. Therefore, I will expect everyone to show me one this year.

What section of Cir 230 says you "must see" a mileage log? There are references as to Diligence and Reliance on client's records, but I don't believe I've ever seen where it says we must see a log book.

We also stress the requirement for a proper record, however I don't think we have ever actually seen a log book in the past several years. Please let me know if we need to change our methods.
Mike

[Super Mom]

What section of Cir 230 says you "must see" a mileage log? There are references as to Diligence and Reliance on client's records, but I don't believe I've ever seen where it says we must see a log book.

We also stress the requirement for a proper record, however I don't think we have ever actually seen a log book in the past several years. Please let me know if we need to change our methods.
Mike

I went back to that course and looked it through, maybe I was scared by the case where a CPA was disbarred for incorrect information he claimed he got from the clients. However, upon closer reading, I see that instance was something he should have been able to determine as dishonest because there is no way they could be living on the income he was reporting for them. I don't actually see where we must see logs or total receipts, like I was thinking. Thanks for prompting me to research that more! Tax season will be much more pleasant for me and my clients now! I am going to make up a form for them to sign that all of there expenses are substantiated and correct though!

[Gary2]

I may not have worded it well enough. I dd not mean they refuse to show it to you with a straight face.

More often than not, the situation is like this. You explain the mileage log requirement to a client. He says he understands. You ask if he has kept the mileage log. He says yes and he has it at home. At that point, do you insist that the client should go home and bring the mileage log to you before you will claim the car expenses for him? or just his affirmation that he has it at home is enough for you to proceed?

Don't explain and then ask. Ask, then if necessary explain. Ask if they have a log, whether it's handy (it can't be very reliable if it's not in the car and they used the same car to get to you as they're claiming), and if not handy, ask to describe a typical entry. Then you explain what the entry should have been.