May have mistakenly written off a mileage allowance on my individual tax return. Got a letter from the IRS. How do I figure out if I was wrong AND what do I do if I was?

[Hal_Al]

What does the IRS letter say?
If you are self employed, your mileage goes on line 9 of Schedule C. You must also completed Part IV of Sch C.

If you are a regular W-2 employee; You are allowed to deduct your mileage (53.5 cents for 2017) and other job expenses, subtracting what you were reimbursed (do not subtract your reimbursement if it was included on your W-2 as taxable income). TurboTax completes form  2106, which  then carries to Misc itemized deductions on line 21 of Schedule A. The problem with this is that you only get to deduct that portion of  your misc deductions that exceed 2% of your AGI. and then only if your total  itemized deductions exceed the standard deduction.  (2% rule explained: <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/2902781-what-is-the-2-rule">https://ttlc.intuit.com/questions/2902...>)

[Lisa995]

rather hard to deduct mileage by mistake.....can you explain your situation and why you think you did something wrong?

[kscioli]

The letter says that I need to provide detailed logs with dates and miles etc. Which makes me think that I mistakenly wrote the mileage off. Why wouldn't turbo tax have prompted me to do so? Also, at this point it would be almost impossible to do because I didn't keep logs.

[macuser_22]

TurboTax does not ask for your proof of anything since that does not go on a tax return.   The IRS can ask you to prove ANYTHING that you claim on a tax return, including having to product a certificate of marriage if they question your marital status.

[kscioli]

I see. So I was wrong in assuming if it was accepted it was ok. I'm on the phone with the PA department of rev as we speak.. should be fun..

[macuser_22]

"Accept" only means that the taxing authority received it and it passed the basis tests - valid SSN, no missing fields, etc.   That does not verify the validity of any data that you put on the return.  They then process the return.    The IRS has 3 years to send audit letters if they question anything - each state has it's own rules.

[SweetieJean]

IRS, or PA Dept of Revenue, or both?

[kscioli]

I was wrong It was PA DOR and they haven't given me my refund so they want mileage logs. Turns out after investigating further I can't write it as an expense so I'll ask it to be removed..

[kscioli]

Thanks for your help everyone.

[Opus 17 · Accepted solution]

Why are you talking to the PA Dept of Revenue if the letter came from the IRS?

In any case, the IRS can ask anyone for proof of anything at any time up to 3 years after filing (or 6 years if they suspect deliberate fraud).  This may be what you might call a mini-audit: The IRS picks some number of tax returns to verify business mileage, some other returns to verify charity donations, and so on.  Instead of doing a full audit of everything, this allows them to target specific areas that they believe are susceptible to fraud, and allows them to gather statistical information on areas they should focus on in the future.  (If people tend to be unable to prove mileage claims, they might audit more in the future, and vice versa.)

There's no need to call the IRS or PA DOR, simply respond to the letter with a letter of your own and copies of all your proof.  Work-related mileage is supposed to be documented with contemporaneous records showing the date, business purpose, and mileage of each trip.  This might be in a mobile app or a paper log book you keep in your car.  If you commonly make the same trip, you might include a printout from a navigation service confirming the mileage.

Put together your proof, documents, spreadsheets, and a cover letter explaining it all, and send it to the office that sent you the letter.  Be sure to pay close attention to any deadlines or time limits.

[ARN]

Did you have to amend your return after you spoke with them?

[ARN]

Were you able to amend your return once you spoke to them and explained it was a mistake?