After conducting a two-year audit of a church volunteer and consultant, the Internal Revenue Service concluded that the individual being audited had understated her income tax liability by $55,000. The taxpayer appealed to the United States Tax Court. In Barnes v. Commissioner, T.C.Memo, 2016-212, the Tax Court addressed a number of issues, including the proper substantiation of car expenses, internet expenses, supplies, and charitable contributions. The Court's treatment of these expenses is instructive and is summarized in this article.
Deductions for the business use of a car are subject to strict substantiation requirements described in section 274(d) of the tax code. Section 274(d) allows taxpayers to substantiate expenses incurred in the business use of a car either by tracking the actual expenses of using the car, or by multiplying business miles driven by a standard mileage rate set by the IRS.