If you use a mileage record and keep receipts, you have all you need for the IRS’s documentation requirements, right? Not necessarily.
Thompson Reuters’s Five-Minute Tax Briefing recently highlighted a court case against a taxpayer who was a self-employed nutritional supplement salesperson. He deducted expenses on Schedule C for car and truck, travel, meals, and entertainment, and kept a mileage record and receipts.
But the court ruled against him because his mileage record failed to show how the mileage was related to his business or where he was going on certain days. His receipts also failed to show that the expenses were actually for his business — he claimed meals, entertainment, and travel expenses that he later admitted were used only for himself even though he had previously indicated they were part of his team training.
Because of the discrepancy and lack of detail in the records, the court ruled they were unreliable and disallowed the deductions. The moral of the story is to keep records in even more detail than you think you’ll need. You can never have too many details when it comes to record-keeping for the IRS.