Substantiation Requirements for Employee Expenses

The Internal Revenue Service considers certain employee expenses to be particularly susceptible to abuse. Therefore, in order to claim a deduction for travel, entertainment, business gifts, or the use of certain listed property such as automobiles, an employee must substantiate the expenditure with adequate records or sufficient evidence corroborating the taxpayer's own statements. This documentation must show the amount, time, place, and business purpose of the expense. The IRS has placed an additional substantiation requirement for entertainment and gift deductions. The taxpayer claiming the deduction must be prepared to show the business relationship of the expense.

Tax Benefit Rule

The purpose of the tax benefit rule is to create a balance between what appeared to be a proper deduction at the time it was taken and the fact that the assumptions on which the deduction was based were erroneous. If a taxpayer deducted an amount from his gross income in one year resulting in a tax benefit to him, and an event occurred in a later year that was fundamentally inconsistent with the premise on which the deduction was based, then the taxpayer must include an amount in gross income of the current year to the extent that the amount was deducted in the prior year.

Enrolled Agents

Most people know that both certified public accountants and attorneys prepare taxes and are entitled to represent them in front of the Internal Revenue Service. But fewer taxpayers are familiar with the role of the enrolled agent in income tax preparation.

Terminating a Business

You have decided to close your business. What you really want to do is just pick up your box of personal belongings, shut the door, and walk away. But unfortunately, it is not quite that simple.

Due Process in IRS Collection Actions

The Internal Revenue Service is now required to give taxpayers whose property might be levied upon pre-notification of the levy and an opportunity for a formal hearing and judicial review.