from the Equine Tax Group

Newtown, PA — Larry Rosenblum, pesident of the Equine Tax Group, cautioned horsepersons that as far as the IRS is concerned, “If it’s not in writing it never happened.”

Rosenblum explained when an agent reviews a tax return and finds expenses claimed that the taxpayer states were paid in cash, three problems can develop.

“First, the agent will require proof the expense claimed was actually incurred. Ideally this should take the form of a printed receipt with a name, address and phone number of the seller that is dated and contains details of the transaction.

“Second, the agent will want to know how the taxpayer obtained the cash used in the transaction. The biggest mistake one can commit in these situations is not reporting cash receipts and then using that cash to pay for an expense you wish to claim on your tax return.

“Third, if the expense is for a service requiring the issuance of a 1099 a problem is created if the 1099 wasn’t issued.

“We encourage our clients to have a separate business bank account, deposit all receipts so that income ties in properly and pay for expenses by check or debit/credit card if at all possible.

“I have witnessed the IRS, in a case where a horse earned $100,000 and all expenses, including purchasing the horse, were paid for in cash without any paper trail, determine that the taxpayer had income of $100,000, ignoring all expenses including the cost of the horse.

“Naturally we appeal these type cases and typically most expenses are allowed to some extent since we reconstruct the transaction and obtain proof it actually occurred. However, it’s much easier to do things right the first time.”

The Equine Tax Group has a nationwide toll free number at 888.338.2999 for those with questions.