Don't Be Like Mike

Why You Should Never 'Be Like Mike'

by Wayne M. Davies

I regularly receive email from sincere folks who ask
questions like this: "Is it really true?
If I don't have good records, will I really pay more
tax than I could/would/should have?"

Or how about this one:
"Wayne, if I don't have receipts, does it really matter?
If I get audited, will the IRS really nail me for not
substantiating my deductions?"

The answer to every one of those questions is an
emphatic "YES!"

And if you think I'm just making this stuff up to
scare you, well, think again!

Here's the proof that the IRS does really "nail"
the average Joe for not having receipts.

I'd like you to meet an average Joe, although his name
is really Mike -- Michael Robert Cottrell, to be
exact.

Mike was self-employed and made about $5,700 in
self-employment income in Year 2000. He didn't report
that income because he thought, "I have at least that much
in expenses, so my expenses offset my income and I
didn't actually make any profit. So there's really
no need to report the income or the expenses."

Well, Mike got audited by the IRS, and when the IRS
told him to "prove" those deductions with a paper
trail, Mike was unable to do so. He literally had
no records whatsoever to document his claim that
his net profit was zero.

He admitted to receiving the $5,700 in income, but
then proceeded to claim that about 50% of that income
was spent on materials, 25% went toward subcontracted
labor, and the rest went to pay other miscellaneous
expenses and debts.

The IRS said, "Prove those deductions." Mike said,
"I don't have any records. They were lost when I
moved." The IRS said, "Sorry, Mike. No receipt,
no deduction."

End result: Mike was "nailed" by the IRS with a tax
bill to the tune of $1,625. Because he didn't
have any written record of his deductions, his deductions
were disallowed.

There you have it. It does happen. And it can happen
to you, if you choose to Be Like Mike.

What's a self-employed person to do?

For more tips on how to audit-proof your return, go to:

"Revealed: The #1 Reason You Pay Too Much Tax"
http://www.YouSaveOnTaxes.com/one-reason.html

"A Close Encounter of the IRS Kind:
How To Audit-Proof Your Tax Return Forever!"
http://www.YouSaveOnTaxes.com/close-encounter.html

NOTE: The information about Mr. Cottrell is a matter
of public record -- Michael Robert Cottrell T.C.
Summary Opinion 2003-162.

About The Author:

Wayne M. Davies is author of three tax-slashing eBooks for small business owners and the self-employed:

The Tax Reduction Toolkit
http://www.YouSaveOnTaxes.com/toolkit

Incorporation Tax Secrets Revealed
http://www.YouSaveOnTaxes.com/secrets

How To Incorporate Yourself For Free
http://www.YouSaveOnTaxes.com/how-to-incorp

Wayne's eBooks are available separately, or at a discount as a 3-volume set:

The Ultimate Small Business Tax Reduction Guide
http://www.YouSaveOnTaxes.com/ultimate-guide

To receive a free copy of Wayne's 25-page Special Report,

"How To Instantly Double Your Deductions"

click here:

http://www.YouSaveOnTaxes.com

www.YouSaveOnTaxes.com

A Division of Wayne M. Davies Inc.

4660 W. Jefferson Blvd., Suite 220

Fort Wayne, IN 46804

Tel: (260) 459-3858 / Fax: (260) 459-0124

email: YouSaveOnTaxes@aol.com

http://www.YouSaveOnTaxes.com

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