January 2003

Re: Employee Business Expense Records

Dear Client:

The Internal Revenue Code has stringent requirements for the deductibility of travel and entertainment deductions. The law states that you are required to keep “adequate contemporaneous records” to substantiate these expenses.  If these records are not kept, you will not be able to claim deductions with respect to these items on your tax return.

An adequate record includes an account book, log, diary, journal, expense statement or other similar records.  You must record the necessary substantiation in this record book on a current basis.  This recording should be made at or near the time the event occurred.

The contemporaneous records must indicate the following:

1.      The amount of the expense;

2.      The date and place of the travel, giving rise to the travel, entertainment, recreation or amusement;

3.      The business purpose giving rise to travel, entertainment, recreation or amusement;

4.      The relationship of the person or persons being entertained or receiving a business gift.

Your tax preparer is required to obtain a written confirmation from you stating that you have adequate contemporaneous records.  Without this statement, the preparer cannot sign the tax return.  Failure to meet with record keeping requirements generally will be treated as an act of negligence, even an act of fraud and may be subject to penalties, as well as disallowance of the deductions.

With respect to auto deductions, the log or other records must indicate the date of trip, including local transportation, and the mileage driven for business or investment purposes. The total mileage driven should be obtained from the odometer and should relate to each particular trip.  Your odometer should be read and recorded in your log at the beginning and end of the year.  The mileage recorded will be used to determine the business use of your auto.  Keeping these records is extremely important for you to substantiate your business percentage for these deductions.  Please be advised similar rules also apply to home office computers.

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Conclusion:

If you are required to incur travel expenses, then every effort should be made to comply with the above rules.  Only in this way, can you be assured an opportunity to properly deduct these expenses.

We would appreciate your signing this letter below and attaching summaries of the business expenses you wish to claim on your tax return.

If you should have any questions concerning the above, please do not hesitate to contact this office.

Very truly yours,

JUMP, SCUTELLARO AND COMPANY, L.L.P.

Certified Public Accountants

This is to certify that I have been advised of the record keeping requirements of Section 274(d) of the Internal Revenue Code in that the records for the substantiation of the above should be kept in an account book, diary, statement of expenses or similar record keeping volume.  Expenses over $75 must be accompanied by a receipt in order to be entitled to a deduction.

The items that I wish to deduct can be verified by me in accordance with the above rules and regulations.

Signature:_______________________________      Date:______________________