why hire an accountant?

The case: Two taxpayers owned a home-remodeling business as an S corporation.  The S-corp claimed substantial deductions for fuel, repair and maintenance expenses for their construction equipment, and for business use of the owners' personal vehicles. The IRS denied all deductions.

IRS position: The only bookkeeping records the taxpayers provided were company bank statements and QuickBooks records to substantiate construction equipment expenses and business use of personal cars. 

The business use of the owners' personal cars was for driving to the office - commuting - and driving to worksites and between worksites.  But the QuickBooks and bank records established only the amounts of each expense and the date it was paid - not the business purpose and mileage of each business trip in each car.

Commuting is not a deductible expense so their personal cars could not have been used 100% for business.  Also the company's books did not include a travel log or other records to document the percentage of business use.  

The court would have been willing to estimate reasonable fuel costs for construction equipment, but there were not records of what equipment the business owned or how muchfuel the equipment might have used as a basis for estimating fuel expenses. [Berry v. Commissioner, T.C. Memo. 2021-42]

Are bank and credit card statements enough to prove business expenses? No!  Credit card and bank statements can neither substantiate deductible business expenses nor, by themselves, be used to estimate such expenses.  You must keep receipts, invoices, acknowledgement letters, and/or bank statements to prove the date/time, amount, and business purpose of business deductions.  

This is why hiring an accountant to handle your business records is worth the investment.  Hiring an accountant gives you more time to focus on business, provides better insight into financial status, makes filing taxes easier, and it is a deductible business expense. Contact us to schedule a free consultation so that we can take this burden off of your plate.