Educator Expenses question

[dyne]

A school teacher is entitled to deduct $250 of educator expenses on line 23 of page 1
of the 1040 return. However he or she is supposed to keep records to justify this expense.
What is allowable as a deduction if the teacher lists on my questionnaire or tells me that
she spent LESS than $250? Today a teacher listed her school supplies as being only
$30. Recently another teacher advised he only spent $80. I am taking the position that
if I am aware that a teacher spent LESS than $250, I can only allow this lessor amount
as an educator expense on line 23. What do you think?

[Bees Knees]

From TTB, page 3-4

Educator expense deduction. Eligible educators can deduct
up to $250 (per spouse) of qualified out-of-pocket expenses
paid during the year. Neither spouse can deduct more than
$250 of his or her own qualified expenses.

Note the wording “up to $250…”

In other words, the $250 is a limitation, not a standard deduction amount as if it is some kind of per diem amount. You can deduct up to that amount of qualified expenses. If you only have $30 of qualified expenses, then that is all you can deduct. If you have more than $250 of qualified expenses, then $250 goes on the front of the 1040 and the rest goes on Schedule A.

[gkaiseril]

And the amount paid over $250.00 is subject to 2% of AGI.

[dyne]

Thanks guys so much.

[FEDUKE404]

Another option for extra teacher expenses

And the amount paid over $250.00 is subject to 2% of AGI.

I know one preparer who slides the amounts >$250 into the contributions column, hence eliminating the 2% floor for employee "business" expenses.

The best answer I could come up with is "perhaps"....

FE

[gkaiseril]

Does not look like 'perhaps' per IRS Topic 458 - Educator Expense Deduction:

"If you are an eligible educator, you can deduct up to $250 ($500 if married filing joint and both spouses are educators, but not more than $250 each) of any unreimbursed expenses [otherwise deductible as a trade or business expense] you paid or incurred for books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials that you use in the classroom. For courses in health and physical education, expenses for supplies are qualified expenses only if they are related to athletics"

I would not consider a business expense as a charitable contribution.

And in Pub 17 seems pretty clear where on Schedule A (Form 1040) as to what line to use, http://www.irs.gov/publications/p17/...ink1000172922:

"You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A (Form 1040), line 21."

[FEDUKE404]

Confused??

Does not look like 'perhaps' per IRS Topic 458 - Educator Expense Deduction:

" (IRS cite removed) "

I would not consider a business expense as a charitable contribution.

And in Pub 17 (also removed)..."

You are missing the point.

OF COURSE employee business expenses (required/necessary/etc) can never be considered as a charitable contribution.

But a valid point could be made that under the proper circumstances a teacher who, from a "helping the school" standpoint and out of his/her own pocket, purchases certain items to be used in the school classroom can take as a qualified charitable contribution the cost of those items.

It's really no different from buying bottled water for the track team nor purchasing uniforms for the basketball team.

FE

[gkaiseril]

I think the IRS has clearly stated how to record the excess expenditures.

The adjustment is in TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART I > § 6. Adjusted gross income defined (2) Certain trade and business deductions of employees (D) Certain expenses of elementary and secondary school teachers .

And from the title I would expect that the teacher is an employee.

If it were the parent of a student in the classroom, then that is a different situation. Or if the teacher donated supplies to be used by the entire school or another classroom, could be treated differently.

Now how were these unreimbursed cost handled prior to this special adjustment? They should have been business expenses.

[Lion]

Ask Questions

You need to ask your educator clients how much they spent. You can't just decide to deduct $250 because they teach!

If they donate to their school and receive an acknowledgment on letterhead, they have a charitable donation. If they purchase to use in their classroom, they have an educator expense up to the limit and then an employee biz expense.

[dyne]

Schools expenses which exceed the $250 amount reported on page 1 of the return should NEVER be entered as a Contribution. Remember also that we preparers can be assessed a $1,000 fine by IRS Per Return if we make a mistake perhaps such as this and allow something which is not allowable or put it in the wrong place on the return, etc. And assuming that a taxpayer did bring a statement from the school which stated that he made a CONTRIBUTION to the school it still may not be deductible as a Contribution. Only those amounts donated to IRS Section 501(c)(3) organizatons OR churches are so deductible. There is a list of organizations which qualify for the deduction and ONLY donations to organizations ON this list Or churches can be deducted. I have not looked at the list of such 501(c)(3) organizations in many years but I doubt that a school qualifies. I could be wrong. I do not want that type of taxpayer and would refer him elsewhere.

[Black Bart]

You need to ask your educator clients how much they spent. You can't just decide to deduct $250 because they teach!

Gee; the problem is that it's just so seldom I meet anybody who actually claims to have spent less than $250 . I've had like two bring in actual tickets; everybody else responds to "There's a credit for up to $250 worth of school supplies -- how much did you spend?" with "At least that!" (Attorneys might call that a "leading question," so I probably need to stop mentioning $250).

Anyway, I have them sign something saying they spent it and I'll take my chances on a fine for this -- I think they've got bigger fish to fry.

[dyne]

Thank you Black Bart. I require my clients to fill in a questionnaire each year which I
give to them. I just went back and added: Teacher's school expense amount:$ to my
questionnaire. But about the time they fill in such an expense on my questionnaire, the law
regarding this may have expired or changed. No, I cannot imagine IRS asserting that $1,000
fine as long as we attempt to do what is right!

[FEDUKE404]

IS there a contribution?

Schools expenses which exceed the $250 amount reported on page 1 of the return should NEVER be entered as a Contribution. Remember also that we preparers can be assessed a $1,000 fine by IRS Per Return if we make a mistake perhaps such as this and allow something which is not allowable or put it in the wrong place on the return, etc. And assuming that a taxpayer did bring a statement from the school which stated that he made a CONTRIBUTION to the school it still may not be deductible as a Contribution. Only those amounts donated to IRS Section 501(c)(3) organizatons OR churches are so deductible. There is a list of organizations which qualify for the deduction and ONLY donations to organizations ON this list Or churches can be deducted. I have not looked at the list of such 501(c)(3) organizations in many years but I doubt that a school qualifies. I could be wrong. I do not want that type of taxpayer and would refer him elsewhere.

Well, I (we?) certainly should know what a qualifying charitable organization is by now... but thanks for that information!

This method of treating some of the >$250 expenses as a charitable donation was suggested several years ago by the district manager of a major tax firm, at annual fall training. This person has forgotten more tax information than I have ever learned.

Obviously I (and he!) are in the minority here, and since I do not currently have a client in this scenario it is not a major issue for me. The issue was just raised as a possible solution to excess, or even disallowed, educator expenses. No need to butt heads over it!

BUT - how would you suggest handling this?? A teacher works part-time at a school, which is directly associated with an adjacent church (yes, both are indeed 501(c)(3) organizations!). Teacher receives a Form W2, has numerous school expenses she incurs providing primarily craft supplies and snacks for the children, but she does NOT work the total hours required annually to take any educator expenses as an adjustment to income. Would you dump those expenses onto Form 2106 et al (goodbye due to 2% AGI floor) or instead consider taking a charitable deduction for the cost??

Oh yes: someone earlier made the comment that only a person "who has a student enrolled in the school" could ever take such charitable deductions for goods donated to that school. Most schools would be very upset to cater to that logic, as there are many fine citizens (some even childless) and businesses who regularly make such donations in kind. I will say, however, that the comment "I do not want that type of taxpayer and would refer him elsewhere" seems a bit judgmental. One would think such a client might perhaps have similar feelings toward their accountant?

Oh well - much work to do. This horse has been beaten into a fine powder.

FE

[Lion]

Educator

My husband's a teacher and I have had many teacher clients over the years (just received a call from TWO who had not followed me when I went out on my own but want to return now!) Most have WAY over $250 in classroom expenses. Even the ones that are sloppy about keeping receipts DO have receipts far over $250. When they are purchasing for their own classrooms, qualified expenses up to $250 can be used on the front of their return with the excess going to Form 2106 or Schedule A directly if not travel, etc. I seldom have had a teacher that didn't make the 2% floor, either. I report what actually happened.

However, for planning purposes, I do explain the option of donations to the school as a whole, as opposed to themselves only to use in only their classroom, if accepted by the school and acknowledged in writing could qualify as a charitable contribution -- or the school board. This makes no difference on their bottom line if they always rise above the 2% floor. For instance, when my husband donated a color printer after the school put out a call for printers to be used in a different classroom, he received a letter from his principal and we probably put that under charity to match the language in the letter.

[gkaiseril]

Oh yes: someone earlier made the comment that only a person "who has a student enrolled in the school" could ever take such charitable deductions for goods donated to that school.
FE

I believe you are referring to my post:

If it were the parent of a student in the classroom, then that is a different situation. Or if the teacher donated supplies to be used by the entire school or another classroom, could be treated differently.

Note the first sentence involves a parent of a student in the classroom making a donation to the classroom and not the teacher.

The second sentence describes the teacher making an unrestricted donation to the school which meets all the requirements of a charitable contribution. The teacher's purchase and use of the supplies in the teacher's classroom if a contribution is a restricted donation and like any contribution with a restriction might not be a charitable contribution and then all of it would need to be a 2106 type expense.

By the way, it appears this deduction has expired. Maye taxpreparers and taxpayers should write their legislators to have this provision extended or made permanent.