Tax Court in Brief | Romana v. Commissioner | Miscellaneous Itemized Business Expenses and Accuracy-Related Penalty

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The Tax Court in Brief – June 13th – June 17th, 2022

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Tax Litigation:  The Week of June 13th, 2022, through June 17th, 2022

Romana v. Commissioner, T.C. Summary Opinion 2022-9 | June 16, 2022 | Carluzzo, J.| Dkt. No. 1156-21S

Summary: In this case, the miscellaneous itemized deductions of taxpayers, Raul Romana and Maria Romana (together, the Romanas), were in issue. Raul Romana was employed as a stationary engineer. Maria Romana was employed as a nurse in a plastic surgery clinic operated by Kaiser Permanente (Kaiser). Kaiser’s dress code required that she be dressed in “comfortable” clothes and in a manner that reflected her profession as a nurse. Neither Kaiser nor the collective bargaining agreement for her nursing union had a policy that allowed reimbursement for the expenses she incurred to purchase clothing that satisfied the dress code. While at work, Maria Romana wore scrubs that she purchased and dry-cleaned at her own expense. The Schedule A, Itemized Deductions, included with the Romanas’ 2017 return showed various deductions, including unreimbursed employee business expenses relating to Maria Romana’s employment with Kaiser and Raul Romana’s employment as a stationary engineer. The expense categories were professional dues, uniforms and protective clothing, dry cleaning/laundry, seminars, tools, telephone, and internet. The IRS disallowed the miscellaneous itemized deduction for unreimbursed employee business expenses claimed for uniforms and protective clothing, dry cleaning and laundry, tools, telephone, and internet. The IRS also imposed a section 6662(a) accuracy-related penalties.

Key Issues:

Primary Holdings:

Key Points of Law:

Insights: Deductions are a matter of legislative grace, and the taxpayer bears the burden of proving entitlement to any claimed deduction. If a taxpayer has a miscellaneous item to deduct as a business expense, the taxpayer must be prepared to show that the expense is ordinary and was necessarily paid in connection with operating a trade or business and not for personal use. The IRS and the Tax Court evaluates these deductions on a case-by-case and item-by-item basis. Also, a taxpayer might avoid accuracy-related penalties by engaging and working diligently with a competent tax professional.

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