Question

Samantha Spartan is an instructor of Accounting at the Spartan University (SU) located in Lakewood Ranch, Florida. Instructors at SU are hired on a semester by semester basis as needed and are paid as independent contractors receiving a 1099 for each semester’s work. Samantha has filed her personal 1040 using a schedule C to report income from self employment. Samantha also prepares tax returns for a number of clients and includes that income on the same schedule C as her SU income. Samanths considers all her work “accounting”.

Typically instructors like Samantha have masters degrees and a professional credential such as the CPA. These so-called “term faculty” receive contracts each semester based on student demand for classes at SU.

Samantha has been teaching at SU each fall and spring semester for four years as she has been offered a new contract for each semester (except summer) since she started teaching. Instructors like Samantha teach classes at the undergraduate level and advise students.

In addition to semester by semester faculty like Samantha SU also employs tenure track faculty at ranks Assistant, Associate and Professor. Tenure track faculty have all the responsibilities of instructors and also engage in academic research and have obligations to be involved in University and/or external professional & community service. In order to move from the instructor to the tenure track position (which leads to two-year contracts, renewable each year) Samantha would need to obtain her Ph.D. degree.

The Dean of the Business College at SU has indicated to Samantha that there will no longer be instructor positions like hers available at SU (the school is upgrading its credential requirements) and she would need to show progress toward her Ph.D. degree in order to keep working at SU and potentially become an employee in the tenure track faculty.

Samantha enrolled in the Ph.D. program at Southern State University in Atlanta and must be on campus in Atlanta two days a month for her doctoral seminars. The Dean at SU has arranged her classes so that Samantha can meet her obligations at SU and make her trips to Atlanta. Additionally, the Dean provided a letter to Samantha indicating that the requirements for teaching at SU would require a Ph.D. degree from a respected school such as Southern State.

Samantha completed her first year at Southern State and deducted her tuition ($28,000), travel costs to Atlanta ($12,000) and her books & supplies ($2,800) which included a new Surface PC required in the program.

The IRS has examined Samantha’s return and disallowed all of the deductions claimed on Samantha’s Schedule C in connection with pursuing her degree. What result?

Answer 1

As per Topic Number 513 of IRS Samantha may be able to deduct work related education expenses paid during the year as Itemized Deductions on Form 1040, Schedule A. As Samantha's expenses To be deductibe need to qualify following criteria:

Expenses must be for education that (1) maintains or improves job skills or (2) that employer or a law requires to keep your salary.

Although the education must relate to your present work education expenses incurred during temporary absense from your job may alo be deductible, After temporary absence one should must return to his/her work. Usually absence for one or less year is considered.

Expenses that cab be deductible include:

1) Tuition fees,books,supplies,lab fees and similar items

2) Certain transportation and travel costs

3) Other Educational expenses such as the cost of research and typing.

Since both criteria are met therefore Samantha can claim deductions but not in Schedule C but in Form 1040, Schedule A.