Teacher Disallowed Most of Her Miscellaneous Deductions Taken for Unreimbursed Employee Expenses; Accuracy Penalty Imposed

A teacher was disallowed most of the deductions she claimed as miscellaneous itemized deductions of unreimbursed employee expenses. She claimed classes and educational expenses, travel expenses and expenses for supplies. She also claimed expenses for a health course and for a beach volleyball course; however, she produced no evidence that indicated how the class or the expenditures related to her employment. She produced receipts for a 10-day Mediterranean cruise, including airfare, onboard expenses and the costs of obtaining a passport and visa. The receipts did not establish any business purpose behind the expenses, and they did not satisfy the substantiation requirements of Code Sec. 274(d). The court concluded that the cruise and associated expenses were nondeductible personal expenses.

The receipts the individual produced for weekend field trips that she said served as incentives for her students did not meet the requirements for ordinary or necessary expenses for any of her employers. Other student incentives expenses, computer expense, classroom improvement and maintenance expenses, specialty chair expense and fitness items were also not deductible. The teacher’s purchase of candy and a savings bond were not necessary to perform her job as a primary school teacher. The cost of audio players was not deductible as the teacher failed to explain how the purchase of the players related to the classes she was teaching or whether they were gifts to the students. She was not allowed a deduction for the purchase of her laptop because she used it both at home and at work; she failed to substantiate the business use of the computer.

Her receipts with respect to improving and maintaining her classroom were not ordinary and necessary expenses. The individual’s purchase of a special chair due to a back injury she sustained when she relocated her class from one room to another was not an ordinary and necessary expense of her job. The cost of fitness clothing she purchased for one of her part-time jobs as an aerobics instructor was not deductible as she never stated that the clothing was unsuitable for general or personal wear.

The taxpayer was subject to the accuracy-related penalty imposed by Code Secs. 6662(a) and (b)(1) because of her negligence and her disregard of rules and regulations. She had claimed personal expenses as business expenses and she had failed to maintain records substantiating any valid deductions. The taxpayer failed to present evidence that it was reasonable for her to rely on a medical professional and information presented at a school meeting with respect to her claim of unreimbursed employee expenses. Finally, her reliance on a tax return preparer was not reasonable as she had provided the preparer with only the total expenses to be claimed, and had not presented receipts or other supporting documents.