Venting again.

[Acownt4it]

New client this yr may not be a client next yr.
In the process of getting to know a new client and asking about the worksheet she put together for me. I was asking her about mileage on her vehicle. She is an Insurance Agent.This was the second time I asked her about the 21,000 miles (she is also a wife and mother of 3 kids).

Me:If business miles are 21,000, how many total miles did you put on the auto or is it used exclusively for business and no personal miles are put on the auto.

Her: Okay, I guess 21,000 is total miles 80% business… I think in the past we just used all the miles as business with my previous CPA. (BTW the other CPA had it at 48.59%)
(She bolded my question and bolded and put her answer in Red.)

My first thought was - well go back to your previous CPA.
But instead, I ignored the tone and put the miles in at 80%. Man the nerve I have asking these questions.

[WhiteOleander]

It seems that people are more upset about the mileage issue than any other deduction. They do not want to keep a mileage log. It is too much trouble for them They figure they should just be able to estimate it and go on.

[Lion]

48.59%

She referenced her former CPA's method when giving you this year's mileage. I'd use the former CPA's 48.59% of 21,000 miles on this return!

[erchess]

I was thinking the same thing

She referenced her former CPA's method when giving you this year's mileage. I'd use the former CPA's 48.59% of 21,000 miles on this return!

Furthermore unless she shows me a proper mileage book I am going to indicate on the return that she has no written records and depending on what else she tells me I may indicate that she has no records at all.

[Acownt4it]

Good points. I am going to take them all into account when I complete this return.
Thank you all for listening and supporting my frustration. It has been a long season and these clients that talk to me like I have never prepared a return. This is the same client that when I asked her for everyone's birthdate and she told me they were on the return, why would I ask that.
9 1/2 more days!!!

[snowbird]

Furthermore unless she shows me a proper mileage book I am going to indicate on the return that she has no written records and depending on what else she tells me I may indicate that she has no records at all.

Form 2106 lines 20 &21, do you know the point of these questions?
20 Do you have evidence to support your deduction?
21 If “Yes,” is the evidence written?

The instructions are silent on these questions. I answer these question based on the facts. I will ask the tax payer how they determined business use. If the tax payer does not have written evidence I will say no on question 21 and counsel the tax payer it will be up to them to convince the IRS if asked.

I have tried several software products by answering yes and no for lines 20 & 21, the expense has always been carried by the software to Sch A. Also, I do not know of any CP 2000 or other inquiries based on answering the questions as yes and no.

[JohnH]

Unwritten evidence?

I've often wondered something about how those two questions relate to one another- what evidence would one have if it is not written? If it isn't written, how would we know it is "evidence" under any definition of the word?

(Except of course for the info recorded on my ceiliing, which is a special category of deduction.).

[JohnH]

When they talk to you like you've never prepared a return, just go ahead and humor them.

Say something like "Thanks for bringing that to my attention. I've never prepared a tax return before and thought I'd just start with someone knowledgeable like you to keep me from making any BIG mistakes. That's why I say I'm running a tax 'practice'."

[erchess]

Some Mileage can be reconstructed if needed

For example, if I spent some time on temporary assignments as an employee, my employer probably has the days and locations. If I remember that I drove straight to and from home those days then I only need to take a special trip or consult a map to find my mileage.

For example, if a self employed salesman made certain sales of big ticket items it should be possible to reconstruct these without too much bother. Furthermore some sales people who do not keep mileage records as such do keep records of all their sales calls. Again a little work would yield results that I have seen the IRS accept.

For example if a person with a good bit of mileage who gets a letter questioning it will keep detailed records of mileage for a month or two, I have seen the IRS allow extrapolation from this to past years with little or nothing except the word of the taxpayer and the company that the month recorded was in fact typical.

In All these cases I would check that there is evidence but that it is not written because it is not yet in the form that will be presented to the IRS if the Service should ask. I have many times helped prepare such cases for Audit and had another employee of my firm take the taxpayer in and sell these positions to the IRS.

My own opinion is that the rules could be tightened to the point that no mileage survived audit without a complete and contemporary mileage log of the sort that almost none of my clients have. However, I believe that this will not happen because of the public outcry.

[David1980]

I once had someone tell me they drove 20,000 miles. We had done the return for 4 or 5 years, so while he was there I added up the total miles he had previously deducted and let him know the total. He checked the odometer on the vehicle came back in and decided to only deduct 8,000. I'd bet though looking at his old numbers that it had been inflated drastically every single year. It'd be pretty hard to explain 100,000 miles of expenses on a vehicle when you only put 50k on the truck.

[JohnH]

Understood.

But at the time the return is prepared, would you ever have a situaiotn in which you would answer "YES" to the question asking if you have evidence and "NO" to the question about the evidence being written?

Seems to me that at the time the return is prepared, if 47b is "NO" then 47 would always be "NO". After all, the question is asked concerning the state of the information at a given point in time - it doesn't ask "Do you think you might be able to come up with some written evidence (written or otherwise) if we challenge you?"

I just think the questions are redundant.

[erchess]

To Summarize

If I think the client is going to have trouble coming up with anything that will fly, I check no to evidence and leave written blank because as I recall the second question is conditional on the first question being answered yes. (In my software I am not looking at the form and it may have been five years since I last looked at the relevant part of a F2106 or Sch C.)

If I think the client will be able to reconstruct something that will fly I check yes to evidence and no to written.

If the client has a proper mileage record of the sort that I see one of every two or three years then I check yes to both questions. I do usually take their word for it that they have a mileage book but I do document that they told me they have one.

I do not think the questions are redundant. I think that the taxpayer's memory or knowledge that information can be obtained if needed from a particular source would be two examples of evidence which is not written but which I frequently encounter and have frequently helped transform into evidence the IRS accepted.

[JohnH]

Seems reasonable to me.

[David1980]

Well say that your evidence is you have a coworker who will vouch that you drove what you said you drove.

Not written. It is evidence, sort of?

[JohnH]

Would he vouch for me just before (or just after) the auditor turns to him and asks:

"Now tell me again, what did you say your name, address, and social security number are?"