WTP-GC wrote:
westernrvparkowner wrote:
The worry is not that the IRS will audit, disregard the deduction and you will owe the taxes. The worry is the IRS will disregard those deductions (and maybe a few others while they are at it) and you will owe the taxes, penalties and interest. Since they are generally a couple of years behind in audits, those penalties and interest will be several times the amount of back taxes. Then they decide to not only look at the year they are auditing, but they disallow those deductions for all they years they were taken, and that $1000 in taxes will rise to $20,000+ in multiple years of taxes, penalties and interest.
To deduct the depreciation and expenses on an RV, I would need to be on rock solid ground that the RV was NECESSARY for business, not just a convenience. And you would also need to be doubly sure the business was an actual business, not a hobby, and not a business that did not need to be run out of the RV.
I think most people would find the risk vs reward calculation to be in favor of not taking on the risk. The reward is too low.
That's an extremely gross over-exaggeration of the likely scenario being presented by the OP. Though we could not cover every possible scenario, the penalties for late payment and the subsequent interest is actually quite low (for the scale we're discussing here). If the OP took an additional $10K in deductions due to their circumstances and an audit proved that 100% of that was incorrect (not likely to be the case), assuming a 25% tax bracket, that would be roughly $2500 owed in back taxes. Even if it took the IRS 2 years to audit and issue findings, you're not going to owe more than about $2K or so in penalties. Again, assuming that the complete amount of deductions for the travel related expenses is found to be in error.
But as I said, meticulous record keeping is required. In the highly unlikely event you were audited, the burden of proof is on the IRS to show that your deductions are unacceptable. If you use the established federal guidelines for per diem, mileage, and other expenses, you're going to be covered. Or you can demonstrate that your actual deductions are less than those federal allowances.
And you don't have to prove that anything is a "necessity" for business. You only have to show that the item or service (in this case an RV) is used for business. My smartphone and WIFI device and high-dollar workboots and pretty shirts and hats are not a necessity for business, but they sure are used for it and that's good enough. I do wear my work shirts and hats outside of work sometimes, so should I be compelled to accurately report these uses as non-work-related and only take a 93.7% deduction for such...LOL!
Either way, I vehemently disagree that the risk isn't worth the reward. We're not talking about someone who's trying to shave tens of thousands of dollars on their tax bill, but rather probably someone who has limited (or fixed) income just trying to navigate the 75,000 page tax code while ensuring they're being treated fairly.
Unless you are required by your employer to have a uniform, clothing is generally not deductible. You can't buy $5000 suits and write them off. Like I said, it isn't just the one year, it would be if an audit found a deduction to be in error, they would require that deduction also be disallowed for all the tax years it was taken. Even with your example of $1000 in taxes and a couple of thousand in penalties and interest it would easily reach 5 figures with a few years of deductions disallowed. That is a pretty big pill to swallow for most people. And I would venture to say that if the OP was just trying to squeeze a few bucks out of their fixed income tax bill, taking a deduction for RV expenses won't save them very much money at all, but still would leave them open to an expensive and, for most people, stressful audit and settlement.
