Business Expense Substantiation

In a recent court case the Tax Court granted a self-employed handyman a partial deduction for amounts paid to individuals who assisted him in performing certain jobs, but denied deductions for meals and entertainment, vehicles, telephone and legal fees due to lack of documentation.  This case reinforces the need for self-employed persons to maintain receipts for all business expenditures and to keep mileage logs for business vehicle use.  If meal and entertainment expense is going to be claimed, it is necessary to document who was entertained and what business was discussed either before, during or immediately after the meal or entertainment.  Also, when claiming meal expenses it is important to remember that generally only out-of-town meal expense is allowed.  Published per-diem meal and incidental expense deductions may actually allow for more deduction than the actual expenses incurred.  You should check with your CPA to make sure that you are getting the maximum deduction for your out-of-town meal expenses.