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Shredding Party Woes

As another year comes to a close (oh my, make that a decade!) it's time to clear out that closet & make room for another year of Christmas toys... or tax records as the case may be.

But don't get too shred happy or throw that shredding party just yet as a recent tax court case points out. In Menzies v. Commissioner, Mr. Menzies lost over $12,000 of business mileage deduction because he lacked documentation. Or rather he had documentation, in the form of an mileage log recorded in his "daily planner", but tossed it after he received his refund for the year after the deduction was claimed.

Unfortunately, the audit notice came much later.

And IRC Section 274(d) requires that stricter substantiation for travel, meals & listed property such as personal automobiles. Because of that, no deduction is allowed unless the tax payer has adequate records and/or corroborating evidence.

So before you have that next shredding party, take a look at the NAEA's Record Retention Requirements brochure. You might want to keep a hard copy in the filing cabinet as a reminder for next year.

Happy Shredding!