Plan Ahead As If You Will Be Audited

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GordonCPA's Blog

While your chances of being audited may be relatively low, planning as if you will hear from the IRS could help you survive a challenge. A recent U.S. Tax Court case illustrates why keeping meticulous records and operating in a business-like fashion can mean the difference between claiming tax deductions and having them disallowed.

Facts of the Case

There were many issues involved in the recent case of a married couple and their ventures. Edmond Heinbockel operated a video game and training simulations company, named Visual Purple, LLC (VP). Two of its customers were the FBI and the Department of Homeland Security. Lydia Heinbockel operated a “trunk show” or personal shopping business during the years at issue.

The Tax Court called the couple “possessed by entrepreneurial spirit” since they were also involved in other activities — plane chartering, grape farming and money lending. The Heinbockels claimed that their income was…

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