Audit Question
I realize this is not an IRA question, but would appreciate drawing upon your expertise and any insight you might have into my dilema. I’ve been going through a major IRS audit since late 2011. It’s coming to a conclusion and the IRS is denying my seminar deductions for meal expenses. Since the 1990s I’ve been having dinner seminars for prospective clients with no issues in deducting 100% of the meal cost within that seminar. Is there any IRS code you are aware of that I can relay to the IRS auditor to show her that the meal cost within the seminar is a 100% deductible expense?
Permalink Submitted by Alan Spross on Tue, 2012-08-14 16:36
Are you using line 24b of Sch C?
If so, the line itself does not show a percentage, but the Sch C Inst. for line 24 indicate that 50% of these expenses are the limit. The IRS does not see your math or would not know what % you used unless they asked for documentation of the cost of the meals, and then determined that you did not reduce by 50%. There are probably other possibilities though.
Permalink Submitted by Michael Eischen on Tue, 2012-08-14 17:33
That is where they are attempting to have us count the expense. Up until now we have included a separate line item on Schedule C titled “Seminar Expense.”
Permalink Submitted by mk foss on Tue, 2012-08-14 18:24
Read IRS PLR 9414040 and if it describes your situation – see if you can convince the IRS examiner to follow it.
Permalink Submitted by Michael Eischen on Tue, 2012-08-14 20:56
Thank you for the PLR reference. It looks promising.
Permalink Submitted by Michael Eischen on Fri, 2012-08-24 20:57
My CPA appreciated the letter ruling and discussed it with the IRS agent. She is still not allowing the deduction and indicated that if I persist and have her supervisor review the case, she would bring back into question another $40,000 expense and require detailed documentation and explanation on that expense. She’s claiming that if I had charged a fee for the seminars, I could expense it. My concern going forward is that if I rollover and pay the additional $7,000 tax because of my seminar expense being disallowed, that in future years I will not be able to deduct that expense and set a precedence. Do you think I should pursue seeing her supervisor and/or getting a PLR?
Thank you for your help.
Permalink Submitted by mk foss on Sun, 2012-08-26 23:46
I believe that in an audit situation that you request technical advice instead of going for a PLR. it’s a similar process or at least it was. If you agree to this adjustment for the year under audit, you’ll have to follow the same treatment unless you change something in the way you operate.
Permalink Submitted by Michael Eischen on Mon, 2012-08-27 20:00
Thank you for your helpful advice.