IRS Announces Audits Related to Personal Use of Business Aircraft

The IRS recently issued a news release announcing a special enforcement emphasis on corporate jet usage, including those owned by high-income individuals. Owners and operators of aircraft should anticipate enhanced IRS scrutiny, including an increased likelihood of audit activity for individuals and companies using corporate aircraft, regardless of prior compliance history.

In anticipation of such enforcement activity, aircraft owners and operators should consider confirming ongoing compliance, including an internal review of IRS qualifications for deductions for business use and depreciation, calculation of disallowance for personal and entertainment use, imputation of income, and other tax issues related to the ownership and use of aircraft.

As noted in the press release, the audits and examination of “corporate jet usage is part of the IRS Large Business and International division’s ‘campaign’ program. Campaigns apply different compliance streams to help address areas with a high risk of noncompliance. These efforts include issue-focused examinations, taxpayer outreach and education, tax form changes and focusing on particular issues that present a high risk of noncompliance.”

When embarking on an internal review, owners should include documents and work papers verifying compliance with IRS requirements for deductions, as well as verifications of calculations for imputation of income to individuals for personal use of company aircraft, specific calculations of disallowance of aircraft deductions for personal entertainment use or commuting, and verification that assets properly qualify for depreciation. 

For more information, please contact the Barnes & Thornburg attorney with whom you work or Mary E. Comazzi at 734-489-8019 or mary.comazzi@btlaw.com, Todd A. Dixon at 616-742-3959 or todd.dixon@btlaw.com or Clifford G. Maine at 616-742-3944 or clifford.maine@btlaw.com.

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