jsmith9543[at]aol.com (JSmith9543) wrote:

- quote -

Anyone can "get away" with anything until they are caught. I
believe most people are never caught. When this does happen,
it often comes as a shock. Without question, the most
serious cases I have handled (as in criminal tax cases)
originated not with a random audit or IRS program, but with
a phone call to the CID tip line from either a) a unhappy,
ex-significant other or b) a disgruntled present or former
employee. People who play fast and loose with the tax code
take their chances. In cases such as that you describe,
assuming there is no rational justification for massive
personal expense deduction, the chances of criminal
prosecution are remote (DOJ wants about a $40K tax loss for
prosecution because of federal sentancing guidelines)but the
imposition of a civil fraud penalty would not surprise me if
it came to the attention of the Service.

Timothy E Kelly, Esq.
Certified Specialist, Taxation Law
State Bar of California Board of Legal Specialization

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JSmith9543 wrote:

- quote -

How indeed!

he's never been audited.

Do you need the IRS fraud phone number perchance?

Happy New Cheer$,
Harlan Lunsford, EA n LA

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L. T. Portella wrote:
- quote -

Except for schedule C, on all other business tax returns
meals are listed along with other expenses, e.g. line 26 on
1120S. Good software like ATX prominently mentions travel
on line one of that list and 100% of meals on the next, with
the percentage deduction below. This deduction allows for
different percentages of course, i.e. truckers.

On schedule C you list 100% then the deduction below it. I
saw last year a 2001 return with 100% on the line and below
it was subtracted 5%, resulting in 95% of means deducted.
Client swore he'd never received any correspondence from IRS
taking exception.

Happy New Cheer$,
Harlan Lunsford, EA n LA

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jsmith9543[at]aol.com (JSmith9543) wrote:

- quote -

It's called "audit roulette". He gets away with it until
he's found out. If his S corp. is profitable, and his
expenses are not large in relation to sales, he may get away
with it for a while.

--
Chris Green

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jsmith9543[at]aol.com (JSmith9543) wrote:

- quote -

It's simple. You work for someone who is delusional. On
the day you learn he is going to be audited it will be in
your best interest to have another job before the audit is
finished.

Dick

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Question - my boss charges ALL of his meals (99% personal,
not business), then deducts them on his 's' corp. return as
M&E - how does he get away with this? Also, deducts ALL of
his grocery store purchases as 'research' for his business -
how can he get away with this too?

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"Paul A Thomas" <taxman[at]negia.net> wrote:
- quote -

Very neat to show 100% in one line and subtract a second
line showing 1/2 of the meals.

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"Mauibob" <mauibob[at]aol.com> wrote:

- quote -

You take half as a deductible expense and the other half as
non-deductible expense. You have to track all transactions.
In this case, even though half is NOT deductible, it was
spent on your behalf and must reduce your basis in the
stock. You basis in the stock is the max you may deduct in a
loss year, the balace suspended and carried forward to
future profit years.

Mike Lewis, CPA

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"Mauibob" <mauibob[at]aol.com> wrote:

- quote -

An income statement is used for reporting purposes and
should list the full 100% of all amounts spent that are
properly expensed and not otherwise capitalized or accounted
for. It doesn't matter what type of entity you have, C
corp, S Corp, LLC, SMLLC, Schedule F, or whatever.

If you are asking how to deduct meals and entertainment on
your tax return, then again, it doesn't matter what type of
entity you are. The deductible portion of your meals and
entertainment go on the return as a deductible expense and
the nondeductible portion becomes a Schedule M adjustment.

Good luck,
Gene E. Utterback, EA

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"Mauibob" <mauibob[at]aol.com> wrote
- quote -

You need to account for it at 100% of your cost.

Then, on the tax return, take only half that amount. For an
"S" corp, there is an adjustment made on Schedule M-1 to
report the other half to balance to book income.

I like to help the people at the IRS by reporting the meals
at 100% of the amount, then on the next line, subtract from
the expense 1/2 of the meals.

--
Snowmen fall from heaven unassembled.
-------------
Paul A. Thomas, CPA
taxman at negia.net

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How should I deduct expenses for my small business for meals
and entertainment? It is an S-corp. Should I just take 50%
of the receipt and enter it into the Income Statement?

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