Tax question for the all-knowing board

[Cosmos]

We are itemizing this year for the first time since 2006 when we lost our mortgage interest deduction. We are relying on state and local sales taxes + property taxes to get us over the standard deduction.

Question- Aside from triggering an IRS audit for claiming actual expense, what are the pitfalls of using credit card statements instead of receipts? We have the actual receipts for 'big ticket' items but not for everyday expenses. Everyday expenses are considerable because we have a rewards card we use instead of writing personal checks.

Thanks in advance.

 

[mrtailgate]

We are itemizing this year for the first time since 2006 when we lost our mortgage interest deduction. We are relying on state and local sales taxes + property taxes to get us over the standard deduction.

Question- Aside from triggering an IRS audit for claiming actual expense, what are the pitfalls of using credit card statements instead of receipts? We have the actual receipts for 'big ticket' items but not for everyday expenses. Everyday expenses are considerable because we have a rewards card we use instead of writing personal checks.

Thanks in advance.

First, you are taking sales taxes over state and local income taxes, right? You don’t get both.

The biggest issue is that the credit card statement in and of itself does not list the tax amount but merely the total charge. Now it’s just arithmetic but the taxpayer has burden of proof of validating amount and the receipts do this. Hard to imagine that the IRS would not accept the computation based on credit card charges, but there is certainly at least the possibility that you haven’t sufficiently established the actual tax amount you paid on purchases.

So, ultimately depends on the agent who could potentially be assigned and how they approach.

 

[CampbellLION]

You would probably lost the sales tax battle without receipts since credit card statements won’t show what you actually bought. You could just be stocking up on visa gift cards at Walmart rather than making taxable purchases.

 

[Cosmos]

First, you are taking sales taxes over state and local income taxes, right? You don’t get both.

The biggest issue is that the credit card statement in and of itself does not list the tax amount but merely the total charge. Now it’s just arithmetic but the taxpayer has burden of proof of validating amount and the receipts do this. Hard to imagine that the IRS would not accept the computation based on credit card charges, but there is certainly at least the possibility that you haven’t sufficiently established the actual tax amount you paid on purchases.

So, ultimately depends on the agent who could potentially be assigned and how they approach.

Correct. I'm taking sales tax deduction. My state has no income tax.

I've read numerous periodicals which say using credit card statements to reconstruct sales taxes paid is an option if you don't receipts. But of course, IRS instructions remains mum on it. I could use the IRS sales tax deduction calculator but it woefully understates my sales tax paid. For those of you considering it, don't!

As far as internet purchases for goods bought from out-of-state, I don't claim them. I do so because the levy of your local tax is an ongoing battle. So I include only in-state purchase for which I can find the tax rate online, and out-of-state purchases for which I've a sales receipt. I figure this should pass muster with even the most anal of auditors.

 

[mrtailgate]

Correct. I'm taking sales tax deduction. My state has no income tax.

I've read numerous periodicals which say using credit card statements to reconstruct sales taxes paid is an option if you don't receipts. But of course, IRS instructions remains mum on it. I could use the IRS sales tax deduction calculator but it woefully understates my sales tax paid. For those of you considering it, don't!

As far as internet purchases for goods bought from out-of-state, I don't claim them. I do so because the levy of your local tax is an ongoing battle. So I include only in-state purchase for which I can find the tax rate online, and out-of-state purchases for which I've a sales receipt. I figure this should pass muster with even the most anal of auditors.

I think you understand the issue and potential risks involved. Not wanting to overstep, but if you feel exposed, consider your ability to document other issues in the return as well. Often, if you’re picked up, the audit will expand into other issues as well. So, donations and other soft issues should be buckled down as well.