Business owners can generally deduct the ordinary and necessary costs to conduct business. However, the burden to prove the deductions are legitimate is on the taxpayer. In one case, a married couple wholly owned a software development S corporation. The U.S. Tax Court disallowed many deductions they claimed over multiple years. The couple provided a spreadsheet of travel expenses but they didn’t match the details on their travel logs. While some accounting expenses were supported by invoices, they claimed others were paid in “significant amounts of cash,” for which they had no proof. Other deductions were limited because they were found to be personal. (TC Memo 2023-4)
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