Burden of Proof: Business Expense Substantiation and More

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Proper recordkeeping and substantiation are the foundation of defensible tax deductions. While IRC §162 allows deductions for ordinary and necessary business expenses, taxpayers bear the burden of proving that those expenses meet strict substantiation requirements. Failure to maintain adequate records can result in denied deductions, penalties, and interest—often turning an otherwise valid expense into a costly audit issue. This course provides tax and accounting professionals with a practical framework for understanding the burden of proof and substantiation requirements applicable to business expenses.

Led by Susan Harper, Certified Fraud Examiner and retired IRS Internal Revenue Agent, this course examines recordkeeping requirements under IRC §§162 and 274, the concept of burden of proof, and the types of documentation the IRS expects to see during an examination. Participants will learn how to properly record business transactions, determine appropriate record retention periods, and design effective recordkeeping systems. The course also addresses the consequences of failing to substantiate deductions—including denied expenses, penalties, and interest—reinforced through practical examples and real-world case studies.

Who Should Attend
This course is designed for professionals who prepare, review, or advise on business tax returns and want to strengthen audit defense and compliance practices.

Topics Covered

• Recordkeeping requirements for business expenses
• IRC §162 and IRC §274 substantiation rules
• Burden of proof in IRS examinations
• Substantiation standards and documentation
• Recording and tracking business transactions
• Record retention timelines
• Examples of effective recordkeeping systems
• Consequences of failing to substantiate deductions
• IRS tools and guidance for recordkeeping

Learning Objectives

• Explain why taxpayers are required to maintain records for business expense deductions.
• Identify the types of records necessary to substantiate business expenses.
• Apply the concept of burden of proof to business expense deductions.
• Differentiate general substantiation requirements from heightened requirements under IRC §274.
• Implement effective methods for recording business transactions.
• Determine appropriate record retention periods for tax purposes.
• Assess the consequences of inadequate substantiation, including penalties and denied deductions.
• Locate IRS resources that support proper recordkeeping and substantiation.

Level
Basic

Instructional Method
Group: Internet-based

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
None

Advance Preparation
None