The $2M Yacht Tax Write-Off That Triggered an IRS Audit
The $2M Yacht Tax Write-Off That Triggered an IRS Audit  
Podcast: Small Business Tax Savings Podcast
Published On: Wed Sep 11 2024
Description: Send us a textCould your business deductions survive an IRS audit?In this episode, Mike Jesowshek breaks down a real-life case where a business owner lost $2 million due to an IRS audit after attempting to write off a yacht as a business expense. He explains how poor bookkeeping and a lack of proper documentation led to the disallowance of the deduction. Mike emphasizes the importance of understanding and correctly implementing tax strategies, along with maintaining detailed records to defend against audits. The episode highlights the need for business owners to carefully substantiate deductions and avoid shortcuts, even when seemingly successful entrepreneurs do so.[00:00 - 05:06] Lessons from Poor BookkeepingMike highlights a case where a business owner wrote off a $2 million yacht as a business expense.The IRS disallowed the deduction due to poor records and no evidence of business-related activities.Mike stresses the importance of having clear documentation and bookkeeping to defend business expenses in an audit.He discusses how many business owners wrongly assume that if someone else gets away with a deduction, they can too.[05:06 - 07:04] Understanding Business DeductionsBusiness deductions must be ordinary and necessary for the type of business.It is not enough to claim the deduction; proof must be provided through proper logs and receipts.Mike emphasizes the importance of correct implementation, using the home office deduction as an example.Even legitimate deductions can be disallowed if not implemented and documented properly.[10:12 - 14:52] Correct Documentation: A Defense Against AuditsHaving detailed records and logs can protect business owners if the IRS audits them.Mike shares an example of a client who successfully navigated an audit by having all documentation in place.He also touches on various tax strategies like the Augusta rule, employee entertainment, and travel deductions.Direct Quotes:"Bookkeeping is the backbone of a business. Not only does it help your business grow, but it also helps defend your business expenses in the event of an audit." - Mike Jesowshek, CPA"Just because someone down the road takes a deduction and doesn't get caught doesn't mean it’s right or that you won't get caught." - Mike Jesowshek, CPA"A business deduction has to be ordinary and necessary for your type of business, and then you need the proof to back it up." - Mike Jesowshek, CPA______Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings PodcastJoin TaxElm: https://taxelm.com/IncSight Packages (Full-Service): https://incsight.net/pricing/Book an Initial Consultation (IncSight): https://app.simplymeet.me/o/incsight/sale-------Podcast Website: https://www.TaxSavingsPodcast.comFacebook Group: https://www.facebook.com/groups/taxsavings/YouTube: https://www.youtube.com