Many taxpayers mistakenly believe that bank or credit card statements support deductions but the IRS demands more.

Their needs to be enough detail to support who was paid, exactly what they were paid for, and the date and amount of each payment.

This is how one business successfully reported its deductions.

RD, a mason, operated a proprietorship under both his own name and Red Dirt LLC, which had a separate bank account. RD reported business income on Schedule C, deducting expenses for supplies, equipment rental and contract labor. The IRS denied the deductions.

Held: For the taxpayer. The taxpayer’s bank statement included copies of his checks. The checks included the names of the payees, the amounts paid, and memo notes of what was purchased. The court ruled this was sufficient information to support the deductions.

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