Small businesses often struggle to get credit. Banks want collateral, financial history, and revenue figures that newer or smaller operations cannot always produce. When the business itself cannot qualify for a loan or a credit card, the owners step in. They open credit cards in their own names, charge business expenses to those cards, and……
Tag: Recordkeeping
The IRS Audit Credit-Card-to-Cash Estimation Method for Cash Businesses
When it comes to income taxes, cash businesses have always been a challenge for the IRS. Cash is hard to track. Businesses, whether large or small, often fail to keep records of cash transactions. In other cases, businesses keep the records lose the records by the time the IRS audits the business years later. And……
Tax Disputes When You Have Too Many Records
There are quite a few tax court cases involving taxpayers who did not have sufficient records to substantiate their tax positions. This is probably more than half of the cases that end up in the U.S. Tax Court. But what about the opposite situation where there are too many records? How is one to contend……
From Commingled to Contested: The IRS’s Audit of Tax Deductions
The common idea that business expenses are deductible while personal expenses are not is an oversimplification. In reality, the tax rules are more nuanced. Some personal expenses are deductible, and the line between personal and business expenses is often blurry. This complexity is further compounded by the fact that many businesses, particularly small ones, fail……
Dealing With IRS Audit of a Hobby Loss Activity
The IRS is a silent partner in every business venture. It is quick to take its share of profits when a business venture succeeds. The IRS is often not a good business partner. It often refuses to share in the losses during the down times. This unequal treatment often comes up when the taxpayer reports……
The Balancing Act: Records Needed for Tax Positions
The Goldilocks Principle says that the best outcomes are achieved by finding a balance. It looks for the “just right”—neither too much nor too little. This concept applies not only to storytelling but also to tax recordkeeping. Taxpayers have to strike a balance in maintaining records that are thorough enough to satisfy the IRS but……
Using Estimates to Prove Business Expenses
Imagine this common scenario – you own a small business and incur a legitimate expense that you pay and have some record of. Years later the IRS audits and disallows the deduction for lack of receipts or other documentation. The auditor may request bank statements, which you provide, only to be told those are inadequate.……
Tax on Funds Received as an Intermediary Conduit
As tax attorneys in Houston, we often see investments made by local ethnic communities that are focused on investing overseas or raising money from overseas. This often involves those who immigrate to the U.S. from foreign countries, and do well in the U.S. financially. The investments are often made based on direct knowledge of opportunities……
Using Accounting Records in Tax Court
Whether one likes it or not, the federal government is their business partner. The tax code is often compared to a partnership agreement that sets out the share of the income that belongs to the federal government. Continuing the analogy, the records the business keeps are the support for making the allocation between the taxpayer……