The University of Baltimore Low Income Taxpayer Clinic has launched a new project: the Tax Assistance Project for Immigrants and Refugees, or TAPIR. We will be doing a webinar presentation (Top Tax Tips for Immigrants) on Tuesday 2/28/23 at 7 pm through the Baltimore County Public Library. Register here: https://bcpl.info/events-and-programs/list.html#!/208153
The University of Baltimore Low-Income Taxpayer Clinic (LITC), supervised by attorney, Janice Shih, had the privilege of attending the U.S. Tax Court calendar call on January 13, 2023, to aid unrepresented taxpayers. At the start of the calendar call, Special Trial Judge Leyden identified the volunteer practitioners, including the University of Baltimore’s LITC, to the pro se petitioners who wished to discuss their matter prior to appearing before the Court. Our clinic introduced itself to a Taxpayer with a substantiation issue for business car and truck deductions in the 2018 tax year.
Taxpayer was a full-time nurse practitioner who frequently drove to Pennsylvania for training that would eventually help her establish her own at-home care business. These miles were thoroughly tracked and reported by Taxpayer on Schedule C of Form 1040. Schedule C is used to report income or loss from a business one operates or a profession one practices as a sole proprietor. For an activity to qualify as a “trade or business,” the primary purpose for engaging in the activity must be for income or profit. Taxpayer was not receiving income from the gentleman who offered to train her. Furthermore, Taxpayer had not yet established her business in the year 2018.
Despite this, Taxpayer was reporting her tracked miles and car repair costs on a Schedule C. The car and truck expense deduction seen on a Schedule C allows for a tax reduction for all driving expenses associated with one’s car, including gas, repairs, maintenance, insurance, depreciation, and lease payments. More commonly, a taxpayer may decide to use the Standard Mileage deduction, which is automatically calculated using the standard mileage rate, based on the number of business miles entered. For either of these methodologies of deductions, the taxpayer must be considered a self-employed worker, and receive a Form 1099. Taxpayer was not a self-employed worker, nor did she receive a 1099 from the place of her training.
An attorney who works for the Office of Chief Counsel of the IRS prosecutes the docket of cases before the U.S. Tax Court. Prior to appearing before the Judge, the IRS attorney speaks with the taxpayers about their issue. Ms. Nancy Gilmore, representing the IRS, spoke with Taxpayer about the issues surrounding the 2018 federal tax liability of $3,700. Although Taxpayer was not eligible to claim car and truck expense deductions, Ms. Gilmore offered a settlement to resolve the case by reducing the year 2018 federal tax liability to $2,700. Appreciative of this reduced tax liability, taxpayer grappled with the decision to instead request a 90-day Continuance.
A motion for continuance, if granted, would allow for the case to be rescheduled for a later trial date and grant time to provide further documentation to the IRS. However, a continuance could also revoke the settlement offer to reduce the 2018 tax liability. Through further discussions with Ms. Gilmore, the IRS and Taxpayer were able to come to a settlement for a tax liability amount of $1,800 in the year 2018. With relief, the Taxpayer resolved their issue by agreeing to this reduced tax liability and with knowledge moving forward as to what qualifies as Schedule C allowable deductions.
In the beginning of the calendar call, there was an overwhelming feeling of dire hopelessness from Petitioners who have taken time out of their workday to confront their tax controversy issue. Many of whom are unable to afford legal representation. Tax Court representation is critical when Petitioners have little to no tax knowledge and have nowhere else to turn for answers to their questions. Through knowledge of the tax code, power of negotiation, and vociferous advocacy, LITC ensures all Petitioners are informed about their rights, the tax laws, and what is legally owed. At the conclusion of the calendar call, there is a sense of empowerment and hopefulness felt both by the Petitioners and the volunteer attorneys. It is with great honor that the LITC creates a more equitable judicial system. As students entering the legal profession, we are reminded that we are advocating for real people with real problems.
Submitted by Eleni Hadjipanteli, Rule 19-220 Student Attorney, Low Income Taxpayer Clinic, Spring 2023
Clinic Connections 