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The U.S. Tax Court has found that an individual was not entitled to all of the deductions he claimed for his roofing business due to his failure to maintain adequate books and records.

Tax Court Penalizes Roofer for Inadequate Recordkeeping

  • 11/7/2012

Tax Court Penalizes Roofer for Inadequate Recordkeeping

The U.S. Tax Court has found that an individual was not entitled to all of the deductions that he claimed on tax form Schedule C, Profit or Loss From Business, for expenses related to his roofing business.

The individual provided roofing installations and repair services. The roofer kept minimal records and maintained multiple bank accounts, although none was the sole account for the roofing business. The individual claimed he was entitled to a materials expense deduction under Code Sec. 162. However, the court had limited confidence in the accuracy of the claim, given the absence of his business records.

The individual was liable for the accuracy-related penalty under Code Sec. 6662(a) because the underpayment of tax was due to his failure to maintain adequate books and records. The reasonable cause exception did not apply, because there was no evidence that he acted in good faith with respect to his claimed expenses.

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