Did maps, clothing lists, and phone-payment logs substantiate unreimbursed employee expenses for mileage, work clothes, laundry, phone, and internet?

Plain-English summary

Taxpayers asked Virginia to reconsider its denial of unreimbursed employee expenses for 2015 through 2017 and supplied additional records. The new evidence still did not substantiate the deductions.

• Mileage: maps showed only general locations, not exact addresses needed to verify distance. The couple also described multiple jobs, while Department records showed each kept one job throughout the three years.
• Work clothing and laundry: a list identified shirts, shoes, socks, and professional outerwear, but there were no purchase receipts. Although the couple said the clothing bore company logos, their employment contract did not require uniforms.
• Cell phone and internet: payment logs did not separate business calls and usage from personal use. Only the business portion could qualify.

Because assessments are presumed correct and the taxpayers' new documents still lacked the necessary detail, Virginia upheld the 2015-2017 assessments and its earlier P.D. 19-99 determination. The ruling was the Department's final determination in the matter.

What this means for you

Expense categories need transaction-level and business-purpose records. For mileage, keep dates, exact origins and destinations, distances, and job purpose; for clothing, keep receipts and the employer requirement; for communications, document the business-use allocation.

Common questions

Were general maps enough for mileage? No. Virginia could not verify the claim without exact addresses and consistent employment information.

Did a clothing list prove the deduction? No. Receipts and evidence of a uniform requirement were missing.

Were phone and internet payments alone sufficient? No. The records had to distinguish business from personal use.

Citations and references

• 23 VAC 10-20-165 F.
• Va. Code § 58.1-205.
• P.D. 19-99 and 16-53 -- prior employee-expense and mobile-phone guidance cited by the ruling.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-38

Original ruling text

March 6, 2020

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek reconsideration of the Department's determination letter, issued to * (the "Taxpayers") as Public Document (P.D.) 19-99 (8/27/2019).

FACTS

In P.D. 19-99, the Department upheld the disallowance of itemized deductions for unreimbursed employee expenses for mileage, work clothing, laundry, cell phone and Internet claimed by the Taxpayers on their Virginia resident returns for the taxable years ended December 31, 2015 through 2017. The Taxpayers have asked the Department to reconsider its determination, asserting that documentation provided with their request substantiates itemized deductions for the claimed unreimbursed employee expenses.

DETERMINATION

Request for Reconsideration

Under Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F, the Department will consider a request for reconsideration if the taxpayer has discovered additional evidence that was not available at the time of the original administrative appeal, and the additional documentation could produce a result different from the original determination. The Taxpayers provided additional documentation which they contend will bring about a different result.

Mileage Expense

In P.D. 19-99, the Department set forth the requirements for claiming the standard mileage rate. While the Taxpayers provided maps showing general locations with explanation, they have not provided exact addresses such that the Department can confirm the mileage being claimed, only general explanations regarding locations and distances. Furthermore, the Taxpayers state that they were both employed at multiple jobs during this time period. The Department’s records indicate each Taxpayer maintained one job through all out all three taxable years in question.

Work Clothing and Laundry Expense

The Taxpayers have provided a list of clothing items purchased that includes shirts, shoes, socks, and professional outerwear, but they have, again, failed to provide receipts supporting the claimed purchases. Again, the Department explained the requirements for deducting clothing items and care in P.D. 19-99. In addition, while the Taxpayers claimed the clothing included company logos, the employment contract provided does not include any uniform requirements.

Cell Phone Expense

The Department has addressed the business use of mobile phones on several occasions. See P.D. 16-53 (4/11/2016) and P.D. 19-99. A log showing payments for cell phone and internet were provided. However, no identifiable distinction has been made between the business and personal nature of the usage. Mobile phone and internet expenses would be deductible only for business related calls and usage.

CONCLUSION

Under the provisions of Virginia Code § 58.1-205, in any proceeding relating to the interpretation of the tax laws of Virginia, an “assessment of a tax by the Department shall be deemed prima facie correct.” As such, the burden of proof is on the Taxpayer to show that the assessments were erroneous.

Because the evidence provided to support the business deductions lacks the necessary details, the assessments for the 2015 through 2017 taxable years are upheld.

The Department’s determination in P.D. 19-99 is upheld. This letter is the Department’s final determination in this matter. The Department will issue updated bills with accrued interest for the 2015 though 2017 taxable years. The outstanding balance must be paid within 30 days of the bill date to avoid the accrual of additional interest. If payment is not received within the allotted time, additional interest will be assessed and collection action may resume.

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1588.A

Related Documents

19-99

16-53