Attorney-at-Law

A NO-ACCOUNT EMPLOYER

In Uncategorized on 09/22/2016 at 16:44

STJ Lewis (“A Name That a Shame Never Has Been Connected With”) Carluzzo has a mutated employee expense account to deal with in Andrew Christopher Sanek, 2016 T. C. Sum. Op. 60, filed 9/22/16, a Special Day in this blogger’s household.

AC was a construction road warrior, managing construction jobs and spending a year living transiently in the Sunshine State. IRS concedes AC’s rent for his bed-sitter, but jousts about AC’s mileage log and tolls.

And I can tell you from personal experience those FL tolls are substantial, but you must use the toll roads to get anywhere within lives in being plus twenty-one years. Unhappily, all AC has is toll records for the wrong year, so he loses that one to Section 274 strict substantiation.

Just when you’d think AC was going down on mileage (he did concede about two-thirds of the miles he claimed on his Form 2106), STJ Lew finds AC’s employer really didn’t reimburse AC for his work mileage, notwithstanding the company’s manual says they do.

“[Employer’s] written mileage reimbursement policy notwithstanding, we find from petitioner’s credible testimony on the point that in practice the company reimbursed his employment-related mileage only to the extent of $350 per month, and that amount is included in the income shown on his 2010 return.  We further find that [Employer’s] practice, rather than its written policy, controls.  Under the circumstances, the applicable regulations provide that the vehicle and toll expenses, if properly substantiated, are allowable as miscellaneous itemized deductions.  See sec. 1.62-2(c)(5), Income Tax Regs.” 2016 T. C. Sum. Op. 60, at p. 10.

So AC’s employer, though they claimed they had an accountable plan (employee must produce receipts and get reimbursed for allowable expenditures dollar-for-dollar), really had a non-accountable plan (flat payment for expenses regardless of actual amounts spent).

AC’s cellphone expenses are out, since the year at issue was before the decoupling of cellphones from Section 274.

And AC’s workshirts are out because he can’t prove he couldn’t wear them as ordinary clothing.

But he does get his steel-toe workboots. See my blogpost “He Gave Her the Boot,” 11/11/14.

Finally, AC  avoids the negligence chop.

STJ Lew: “Petitioner, who is relatively unsophisticated as to tax matters, made a reasonable attempt to comply with the provisions of the Code and to exercise ordinary and reasonable care in the preparation of his 2010 return.  We are satisfied that petitioner had reasonable cause and acted in good faith with respect to the underpayment of tax that will remain.  See sec. 6664(c).  He is not liable for the section 6662(a) accuracy-related penalty.” 2016 T. C. Sum. Op.60, at p.13.

 

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