TP is a Schedule C Filer. The IRS sent him a proposed assessment for his tax year 2017, herein, the IRS disallows his expenses under “item 27a,Other Expenses, Sch C” which itemizes the following: 1. Fuel for $18,720 and Per Diem for 32,500. Hence, this resulted in an additional assessment of $8,000 tax balance.
Unfortunately, herein TP has few 2017 fuel receipts but only a total of $3000 and no records to back up his per diem. I know I can use the Federal Meals & Incidental Expenses rate but with this, TP has no record of his business trips. TP is an IC (welder, metal works) for different oil fields in Texas and this requires him to travel a lot.
1. I will be using the Cohan Rule, however, could you please direct me to a reference that I could use in order to reconstruct the Fuel and Per Diem?
2. Could I just possibly negotiate with the Examination Officer a win/win settlement without going to the audit reconsideration or an appeal maybe?
Emmanuel, there must be some record of where he had to be – whoever hired him should have some records of the locations. I would piece it together based upon that and absolutely request a meeting with the manager. If not file the appeal. If all that is gone I would file a DATL