INTRODUCTION

Many of the accounts in this category are not necessarily unique to the auto body and repair business and some expenses that may appear as "Other Expenses" on a particular tax return are discussed in the "Cost of Goods Sold" section or in the "Employment Tax" section of this guide.

Included below, are expense categories where significant areas of abuse were found; either in the sense that adjustments were discovered on a large percentage of the returns examined, or in that large dollar adjustments were produced when the issues were identified and pursued. Additional accounts have been included because their examination may be of assistance in resolving other issues. None of the summaries are intended as a comprehensive guide to the examination of an issue, however.

AUTOMOBILE EXPENSE

Personal use of business vehicles was an area of abuse found on many returns examined. Auto expense related deductions can also overlap many other expense categories including interest, tax and license, insurance, equipment leasing, and depreciation.

Company and personal vehicles are often used to pick up parts and customers or make estimates at another site. Unless they are garaged at the business location, they are also used to commute, vacation, pick up the kids from Little League, and run other household errands. When multiple vehicles were owned or leased by a company, it was not unusual to find one vehicle used by the principal or shareholder and others by family members, unconnected with the business. Porsches,

Corvettes, and other luxury autos are unlikely to be used to pick up the occasional parts and supplies that are not delivered by the vendor.

The most common issues encountered are outlined below under the broad categories of vehicle ownership, though it should be noted that ownership, as stated on a depreciation schedule, should not be regarded as gospel.

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