Diesel Receipts might Sink you in an Audit

Diesel Receipts might Sink you in an Audit

Recently we represented a trucker friend in front of the IRS and we have found many changes in the audit process. Currently, they are focusing on reparations and diesel payments made in cash. The requirement is that cash payments must be accompanied with the cash register ticket or receipt with a name, address, and phone number of the person who made the repair.

Everything was properly prepared and ready for review. There were two years of examinations, 2010 and 2011. We have been waiting for more than a year to have this case reconsidered. Hereafter, I will narrate the development of this audit and how it ended.

My client wanted to be present in the audit and was waiting for me at the building entrance however, I noticed that he was nervous and I suggested it was not necessary for him to come with me since my credential as an Enrolled Agent with the IRS gives me authority to represent my clients without their presence. So, our friend finally chose not to be in the audit, which allowed us to do our job representing him. That was how the review began.

The result in 2010 was excellent. We took about three hours to discuss the evidence presented. However, nothing is perfect and with the diesel payment receipts that our client had included there were some receipts for payments made in cash. Those receipts were from gas stations in the area of Long Beach and Los Angeles, California. After examining each one of those receipts, the IRS auditor explained to me these gas stations had already been investigated and had been found giving blank receipts to truckers, besides the cash register tickets. According to the auditor, they found some truckers had used those blank receipts to increase the amount of diesel purchased. However if my client could have presented the cash receipts accompanied with the cash register tickets, he could consider his case, but our friend was not able to. The result of the 2011 revision had a negative result, as most diesel receipts showed were from payments made in cash and were from the same stations.

It was decided to appeal the outcome under the rules of Cohan (Cohan v. Commissioner, 39 F.2d 540 - 2d Cir. 1930). This is a court case with precedents and allows us to estimate a trucker´s business expenses and present them before the IRS appeals court. Remember, there are always alternatives.


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