Business taxpayers may offset gross receipts with the amount of refunds, returns and allowances that they pay and can substantiate.
November 13, 2020
The owner of a driving school reported gross receipts of $29,000 in 2015, paid to him mostly by credit cards. Requests for refunds however, he stated were paid in cash. He then offset his 2015 gross receipts by the amount of refunds, for which he produced no receipts or other records. His only proof was Yelp reviews, including one customer who said the owner “was going to refund the money and we are still waiting for this.” Based on a lack of proof, the IRS denied the offset. The U.S. Tax Court agreed, finding the reviews didn’t support the taxpayer’s claims.