Avoid these 3 Common Mistakes when Claiming a Vehicle Tax Deduction

Episode Transcript

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Ever sit in your car, look atyour odometer and wonder how

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much of your driving you canactually claim on your taxes?
Today, I'm going to show you howthree business owners lost their
vehicle deductions in tax court,including one who lost over
$50,000, even though they wereactually using their car for
business.
We're going to break downexactly what went wrong, how the
IRS caught them.
And most importantly, how youcould protect your deductions.

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And the most interesting part,it's not just about keeping
records.
In fact, one of these businessowners had detailed records and
still lost everything.
So let's dive into the firstcourt case.
We've got a business owner we'regoing to call E who lost over
fifty thousand dollars invehicle deductions.
Now, here's the twist.
They actually used their vehiclefor business.
Let that sink in for a moment.

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You might be wondering, how doesthat even happen?
When the IRS questioned Ezeabout documentation, he showed
them calendars of his businesstravel.
Sounds pretty reasonable, right?
But here's where it getsinteresting.
The court noticed somethingcrucial.
These calendars weren'tdocumenting his everyday life in
business operations.
In fact, they specificallypointed out that these records

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were created solely for use inthe IRS examination.
So let's talk numbers becausethis is where things get really
interesting.
The court found someinconsistencies in his mileage
claims.
Some trips to New York Cityshowed 354 to 362 miles.
Others, 448 to 450 miles.
And here's the kicker, a trip toAlbany, which is actually

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further, somehow only showed 344miles.
But this isn't the only case.
In Martinez v.
Commissioner, we see the samekind of issues, but with a
different lesson.
The court made a reallyimportant point here.
Proper documentation isn't justabout writing down numbers it's
about telling a coherentbusiness story.
Martinez couldn't connect thedots between where they went and

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why it was business related.
And this brings us to our thirdcase, which really drives home
an important point.
In Nawrot v commissioner, thefocus shift entirely.
The issue wasn't just aboutrecording miles.
The court wanted to see theconnection between the travel
and actual business activities.
So what does this tell us?
The IRS isn't just checking yourmath.

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They're looking at whether yourstory makes sense.
Now here's what I find mostfascinating about all these
cases, and this is something alot of people don't think about.
Long distant travel leaves whatI call a financial footprint
Think about it.
If you're claiming trips tomultiple cities, there should be
a trail of transactions thatmatch your story.
Gas fill ups, hotel stays,meals, every transaction creates

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a record with specific dates,times, and locations, and that
creates something calledmetadata Let me break down how
the IRS can verify these claims.
According to their manual,specifically IRM 4.10.4.3.3
agents can use bank records toverify when and where
transactions happen.
So if you're claiming regulartrips to New York City, but
there's no evidence of gaspurchases, toll payments, or

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other expenses along that route,well, you can see where this is
going.
So what can we learn from all ofthis?
Let me give you three takeawaysthat could save you thousands.
First, consistency matters whenyour records show patterns that
don't make business sense,that's a red flag to the IRS.
Second, business purpose is key.
It's not enough to prove youwent somewhere.

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You need to prove why you wentthere, for business purposes.
And third, real time recordswin.
Creating records during anaudit, that's not going to cut
it, solely because the IRS canverify information using
metadata.
Avoid these three commonmistakes when claiming a vehicle
tax deduction, and you justmight be on to something.
Remember, the most successfulbarbers aren't just great with

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clippers, they're smart withtheir money.
The choice is yours, but theclock is ticking.
Don't let the IRS give you ahaircut you can't style your way
out of.
Your move, boss.