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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28978
Experience:  Taxes, Immigration, Labor Relations
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I live in Houston, outside the tollway. So I am billed everyday

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I live in Houston, outside the tollway. So I am billed everyday at least twice a day for a toll. I have an account with the Toll Road and they bill be 40 dollars a month. I don't keep up with whether I'm driving to work or not. And for a good part of the year I was unemployed. I was driving to and from interviews. Can I deduct the 40 a month? Or do I have to have a detailed log of every toll?

LEV :

Hi and welcome to Just Answer!
You do need to establish the business purpose of deductible expenses.
I suggest to do you best and re-establish a travel log - the reason is that ONLY business related expenses are deductible - but personal expenses may not be deducted.
While you do not need to provide any documents wit your tax return - still you need to keep your travel log with other tax documents and should be able to provide it if audited.
If the IRS audits you and you would not be able to provide any supporting documents - the risk is that deductions could be disallowed. To avoid such situation - you might want to re-establish the travel log and keep it with other supporting documents.

Customer:

I am being audited. I didnt include the tolls when I filed. The Irs guy I talked to told me there were so many mistakes on my return I should file an amended return and still provide all the information they asked for. Is driving to work a business expense? And because I am billed monthly I dont have any way to show when I went through the booth.

Customer:

The accountant made a big mess. She deducted equipment in full that should have been depreciated. She marked the purchase price of a computer as computer repairs. I just gave her a big box of receipts and filed what she gave me. Big mistake. Now that I have spent a week or so going through them, it looks like I am owed a big refund. I just don't know much about how to get the information to the IRS.

LEV :

Is driving to work a business expense?
That MIGHT be deductible business expense but not always.
Driving from home to work and back is commuting - and not deductible.
However driving between two business location is deductible. Also if you ar edriving from home to a temporary business location - that is also deductible.

LEV :

And because I am billed monthly I dont have any way to show when I went through the booth.
As we already mentions - that is your responsibility to provide suporting documents for all your expenses. Absence of supporting documents usually results that deductions are disallowed. Generally teh IRS accept a daily travel log as supporting documents. However - you need to state a business purpose of each expense. If ther eis no way to separate personal and business expenses - none may be deducted.

Customer:

The audit is for 2010. I couldn't put together a believable log. I have no idea where I was on an given day. A good part of the year was spent job searching. I could divide out the time I was unemployed, if that counts. But when I worked, I worked at one place and just drove back and forth. Probably better if I just leave it off. The return is really embarrassing. Once I sat down and really read it, I was ashamed that I put my name of it. A lot of it doesn't make any sense. She's got me unemployed and self-employed at the same time! IRS guy seemed understanding when I told him I actually had all the receipts, it would just take me a while to answer all his questions. He told me not to bother with the questions. Just to amend and provide a receipt for everything. Does that sound right to you?

LEV :

He told me not to bother with the questions. Just to amend and provide a receipt for everything. Does that sound right to you?
That would exactly what I would do. However because you are already under the audit - I suggest to have a local CPA representing you and helping to prepare amended tax return.
You woudl need to have supporting docunments for all deductions. I sugegst to re-establish a daily travel log - but if that is not possible - and your business expenses may not be separated from personal expenses - you would not be able to deduct such expenses.
Specifically for travel expenses - see IRS publication 463 - www.irs.gov/pub/irs-pdf/p463.pdf- page 14 - Figure B. When Are Transportation Expenses Deductible?

Customer:

Tax is not on the Texas bar. I spotted that class. And with good reason. It makes my head feel like it might explode. I do securities fraud. There are only 3 laws, the world is full of those who break them and I hardly ever have to meet them. This woman was a CPA. Came highly recommended. Whatever the equivalent of disbarred is for CPA's has happened to her and she is not allowed to appear in tax court. I didn't do that to her. Seems she really ticked off somebody with friends in high places. The only CPA's I know are forensic types who do work for my firm. I don't want them knowing how much I make and certainly not how much I spend. But you are right. I will have to find someone. I'm not trying to prepare the return. I'm just gathering the receipts. There is no meeting set. I am instructed to mail all of the papers to Philadelphia. Is a face to face meeting the next step if they are not satisfied with what you send?

LEV :

If the auditor would not accept your supporting documents or you woudl not providxe some supporting documents - you will get an assessment letter - there will not be any additional meetings unless the auditor will request one. You may file a complain againt the auditor - but seems that the auditor allows you to amend your tax return - so I do not think you have a ground for complaining. If you complain - you will have a meeting with the supervisor - but because your case looks complicated - you would not have any advantages without representation.
So having someone representing you is in your best interests.

As you had an issue with the tax preparer - that is a separate issue. Generally you are not required to have a tax preparer - and if you hired one - that was your choice. You may request the tax preparer to compensate damages - but that would be a civil matter between you and the tax preparer.
From the IRS prospective - any additional taxes - is your responsibility.
You may however - ask to abate penalties - but that would be your next step after the assessment will be finalized.

Customer:

Good to know. One last question and I will knock off for the night. Generally, can a credit card statement serve as a receipt. I have purchased many services online and never received a receipt. Is it a problem to give the auditor your AMEX statement highlighting the expense?

LEV :

You may use a credt card statement as a supporting document if some of your receipts are missing.
If you do not have ANY receipts - and only have credit card statements - that might be an issue.
But generally - that depends on your specific circumstances and on auditir's perception. But generally a credit card statement with highlighted business expenses is accepted.
If you purchased online - you should have e-mailed receipts. No need to print such receipts - electronic soft copies are also accepted.

LEV :

File a form 843 - http://www.irs.gov/pub/irs-pdf/f843.pdf to request the "accuracy related penalty" be abated based on the preparer's mistake. Here are instructions - http://www.irs.gov/pub/irs-pdf/i843.pdf


If you are asking about abatement of penalty - it should be done on this form or as a separate letter. That is a relatively new form - previously the IRS accepted an abate request as a free form letter that may be attached to a tax return or sent separately..

Customer:

Thanks very much for your help. It seems that penalties are mostly based on under payment of taxes. I didn't underpay. I am owed a substantial refund. The return is riddled with mistakes, but they are all in my favor. The refund, just based on some quick adding machine work looks to be about 50K. When I explained that to auditor, his demeanor changed. He offered me a 60 day extension, assured me that such things happen. I don't think I'm in any trouble - unless I run for public office someday and have to release my returns. And there are only a couple of receipts I can't find. Online subscription to WSJ. I'm sure they sent me an email thanking me for the money, but I can't find it. Nice talking to you. Good night.

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