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Truck Driver Can Take Tax Deduction on Certain Unreimbursed Expenses, Including Clothing. (Parker Tax Publishing June 13, 2012)

A truck driver could deduct certain employee business expenses, including clothing and gravel for his driveway; his reliance on CPA-provided worksheets was reasonable, and thus penalties did not apply. Nolder v. Comm'r, T.C. Summary 2012-50 (5/29/12).

During 2007 and 2008, Thomas Nolder was an over-the-road truck driver. As such, he lived in the cab of his truck while away from home. He used the services of a tax preparer, John Devine, to prepare his returns for the years at issue, as well as prior years. Mr. Devine provided Tom with preprinted worksheets entitled, Trucker's Deductible Business Expenses, which listed various items and also included blank lines for him to complete. Mr. Devine told Tom that he did not need to retain receipts for any items under $75. The worksheets also included the statement, Over 30 Years experience in Trucker Taxation. The IRS examined Tom's tax returns for 2007 and 2008 and, for each year, disallowed a portion of the claimed employee business expense deduction.

In 2010, the IRS issued a notice of deficiency disallowing unreimbursed employee expense deductions of $6,939 for 2007 and $9,544 for 2008. The IRS also assessed accuracy-related penalties due to lack of substantiation for deductions taken.

While upholding the disallowance of some of the deductions, the Tax Court concluded that Tom was allowed to deduct a portion of the disallowed expenses. Tom could not deduct his cell phone expenses because his employer had a reimbursement policy in place that would have reimbursed Tom $45 per month for such expenses. Tom did not seek reimbursement because he was unaware of the policy. As the court noted, no deduction is allowed for such expenses where the taxpayer receives reimbursement for such expenses or had a right to obtain reimbursement for such expenses. The court also disallowed the remaining cell phone expenses over the employer-allowed reimbursement amount due to lack of substantiation.

With respect to Tom's clothing deduction, the court allowed deductions for purchases of specialized clothing and safety equipment. These included coveralls, insulated coveralls, lightweight coveralls, a hard hat liner, rain gear, safety glasses, steel-toed boots, winter work boots, and work gloves. Other deductions relating to clothing that could be used for general or personal purposes were disallowed.

The court allowed Tom's $25 monthly expense for parking his trailer and also allowed expenses incurred for putting gravel in his driveway to accommodate the cab of his truck. Because Tom parked his cab in the driveway, the driveway deteriorated and became muddy. The gravel, the court noted, slowed the rate of deterioration and also allowed Tom to continue to use the driveway to park his cab. Thus, the court concluded, the gravel was in the nature of a repair, and its cost was deductible as a business expense. However, the court disallowed expenses Tom paid to clean his cab and expenses incurred for identity theft insurance, saying such expenses were personal in nature.

Finally, with respect to the accuracy-related penalties, the court held that Tom exercised ordinary business care and prudence as to the disputed items. Despite the inclusion of personal items on the worksheet and the inaccurate advice of the preparer advising him that he need not retain any receipts for items under $75, the court concluded that Tom reasonably relied on his preparer and was not liable for the penalties.

For a discussion of the deductibility of unreimbursed employee expenses, see Parker Tax ¶85,105. (Staff Contributor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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