If you’re a self-employed individual, you can deduct your “ordinary and necessary” business expenses, just like the corporate giants do.
However, you’re also held to the same strict substantiation rules. A taxpayer in a new case, Kalk TC Memo 2024-82, 9/4/24, failed to live up to her end of the bargain.
During 2011 and 2012, the self-employed taxpayer supplied the bulk of her subcontractor services to a client with more than 120,000 employees. Her services allegedly included software installation and employee training.
But she supplied no statement of work or other documentation that detailed the extent of her services.
The taxpayer contended that she incurred numerous business expenses in her software consulting business, including vehicle license fees, vehicle insurance, parking and “working lunches.”
In the end, the Tax Court sided with the IRS. The taxpayer didn’t provide adequate substantiation, so the court denied her business expense deductions. Read more.