Today the Tax Court looked at the case of a police officer who used an unnamed Bozo tax preparer. The officer didn’t have receipts, records, or other documentation to back-up his itemized deductions, yet the tax preparer put down lots of itemized deductions: “[P]etitioner claimed deductions totaling $26,829 comprising $13,737 in unreimbursed job-related expenses, $6,545 of charitable contributions, $3,023 of medical and dental expenses, and $3,494 of State and local income taxes.”
The Court did allow some of the deductions: deductions for dry cleaning of the uniform at $20/week, ammunition of $65, and state and local taxes of $3,494.
The Court did not allow deductions for black Nike boots (these could be worn while off work), private target practice (not proven to be “necessary and ordinary”), commuting (commuting is never deductible), parking (no receipts/back-up records), charitable contributions (no documentation), and medical expenses (he admitted he had no medical expenses). Given that the standard deduction of $4,750 was greater than the itemized deductions (they total $4,559), the IRS was the winner.
But that wasn’t all. The IRS asked for an accuracy-related penalty of 20%. The Court noted:
Petitioner contends that he is not liable for the penalty because he relied on erroneous expert advice given by his tax preparer. However, petitioner did not take reasonable steps to report the correct tax liability. Petitioner did not provide the preparer with any documents or receipts to substantiate any of his claimed deductions, nor did he scrutinize any of the figures that the preparer reported on the return. Further, petitioner failed to question any of the inflated figures. Thus, petitioner did not exercise the due care of a reasonable and ordinarily prudent person. The understatement is due to negligence within the meaning of section 6662(c), and petitioner is liable for the accuracy-related penalty under section 6662(a).
Whether you’re a policeman or an insurance agent, there’s one rule to live by when figuring your itemized deductions: document, document, and document. This cop didn’t, and he paid the price.
Case: Snead v. Commissioner, T.C. Summary 2008-57