Patitz v. Comm'r of Internal Revenue

• Decision Date: 27 September 2022
• Docket Number: 2784-19
• Parties: LORI MICHELLE PATITZ AND ANDREW ROBERT MOODY, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

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T.C. Memo. 2022-99

LORI MICHELLE PATITZ AND ANDREW ROBERT MOODY, Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 2784-19

United States Tax Court

September 27, 2022

Lori Michelle Patitz and Andrew Robert Moody, pro se.

Jeremy D. Cameron, A. Gary Begun, and Mark J. Tober, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

WEILER, Judge:

Respondent determined that petitioners, Mrs. Patitz and Mr. Moody, are liable for federal income tax deficiencies of $7,495 and $15,366 and accuracy-related penalties pursuant to section 6662(a)^[1] of $1,499 and $3,073 for 2015 and 2016, respectively. Petitioners invoked the Court's jurisdiction by timely filing a Petition for redetermination. Petitioners resided in Florida when the Petition was filed.

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After concessions,^[2] the issues for decision are whether petitioners are (1) entitled to Schedule A deductions for 2015 and 2016, (2) entitled to Schedule C deductions for 2015 and 2016, and (3) liable for accuracy-related penalties under section 6662(a) for 2015 and 2016.

FINDINGS OF FACT

I. Petitioners' Backgrounds

A. Mrs. Patitz

During 2015 and 2016 Mrs. Patitz was employed by Ricoh USA, Inc. (Ricoh), in various roles. During this same period she also worked as a self-employed contractor selling life insurance policies.

As a Ricoh account executive, Mrs. Patitz was responsible for reaching out to all current and potential customers in Broward County, Florida. As a Ricoh major account executive, she was responsible for calling on all current and potential customers in Miami-Dade County, Florida. Additionally, as a Ricoh employee, she was given "activity standards" that outlined what was expected of her in her roles as an account executive and a major account executive. The activity standards required her to meet weekly sales goals with potential customers. As an account executive and a major account executive, she received $200 and $350 monthly business expense stipends, respectively, to offset her business expenses.

In 2016 Mrs. Patitz continued to work for Ricoh in her role as a major account executive, and beginning in or around June 2016 she transitioned to a digital imaging specialist position. This position required her to travel between Jacksonville, Orlando, and Tampa, Florida. As a digital imaging specialist her responsibilities included traveling to and from Ricoh client sites to scan and digitize client records. Since Ricoh would reimburse her for travel expenses incurred outside of Jacksonville, Mrs. Patitz's weekly mileage expenses accounted only for her local trips in Jacksonville.

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While still working full time for Ricoh, Mrs. Patitz obtained her insurance license and in 2015 began expanding her insurance business, selling supplemental insurance policies through PMA USA. She traveled to various company worksites with the goal of selling policies to the employees. When she was not traveling between worksites, Mrs. Patitz conducted business from her home office. She continued to sell life insurance policies during 2016. However, she ultimately transitioned from direct-to-individual sales to selling packaged insurance plans to various employers.

B. Mr. Moody

During 2015 and part of 2016 Mr. Moody was employed by Blue Streak Courier (Blue Streak) as an area manager responsible for managing the south Florida region. Specifically, he served the area spanning Vero Beach to Key West, Florida.

Mr. Moody's duties included the delivery of "on-demand" packages as well as packages that other delivery couriers either left behind or were unable to deliver. His duties also included ensuring that the couriers were working in a professional and efficient manner and that the warehouses were properly maintained. He was required to travel to Blue Streak's warehouses weekly and occasionally would have to stay overnight in hotels. Blue Streak paid hotel expenses while he was traveling.

Mr. Moody continued to work for Blue Streak until petitioners moved from Fort Lauderdale, Florida, to Jacksonville where he began a new career as a teacher and was employed during the latter half of 2016.

II. Petitioners' 2015 Tax Return

Using married filing jointly status petitioners timely filed their joint 2015 Form 1040, U.S. Individual Income Tax Return (2015 joint return), reporting income of $103,107 from Forms W-2, Wage and Tax Statement. Petitioners attached Schedule A to their 2015 joint return (2015 Schedule A) and reported unreimbursed employee expenses of $37,906.

Petitioners also attached Schedule C to their 2015 joint return for Mrs. Patitz's insurance business, reporting gross receipts of $3,736 and expenses totaling $23,046, which resulted in a business loss of $19,310.

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A. Schedule A Expenses

Petitioners attached to their 2015 joint return Forms 2106, Employee Business Expenses, reporting expenses deducted as Schedule A unreimbursed employee expenses, which are detailed below.

1. Vehicle Expenses

Mrs. Patitz reported 37,250 business miles and claimed a vehicle expense deduction of $21,419. Mr. Moody reported business miles of 19,970 and claimed a vehicle expense deduction of $11,483.^[3]

Petitioners each kept handwritten contemporaneous mileage logs while traveling and subsequently transferred the entries into electronic logbooks.

2. Meals and Entertainment Expenses

Mrs. Patitz and Mr. Moody reported meals and entertainment expenses of $7,322 and $3,546, respectively.

Mrs. Patitz provided a single Denny's restaurant receipt; however, petitioners did not otherwise produce any documentation such as bank statements, itemized receipts, or credit card statements to substantiate their meals and entertainment expenses.

3. Tool and Supply Expenses

Mr. Moody reported tool and supply expenses of $1,455. He did not provide any bank statements, itemized receipts, or credit card statements related to his tool and supply expenses, nor did he provide any documentation indicating that Blue Streak employees were required to purchase their own tools or supplies to perform their duties.

4. Uniform Expenses

Mr. Moody reported uniform expenses of $355. He did not provide any bank statements, itemized receipts, or credit card statements related to his uniform expenses, nor did he provide any documentation indicating that Blue Streak employees were required to purchase uniforms.

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5. Other Business Expenses^[4]

Mrs. Patitz reported other business expenses of $675. Included in these expenses are $500 for an iPad used for work presentations and $150 for a keylike device Ricoh account executives use to unlock and read Ricoh machine data. She paid for the keylike device in cash. She did not explicitly identify her remaining other business expenses.

Mr. Moody reported other business expenses of $245 but did not identify what they comprised.

Petitioners did not provide any bank statements, itemized receipts, or credit card statements regarding their other business expenses.

B. Schedule C Expenses

Mrs. Patitz reported the following Schedule C expenses for 2015:

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Expense	Amount
Business Use of Home	$536
Meals and Entertainment	1,789
Supplies	987
Repairs and Maintenance	1,487
Legal and Professional Services	192
Insurance (Other than Health)	365
Utilities	3,650
Office	3,345
Car and Truck	10,695
Total	$23,046

Mrs. Patitz did not provide any records, bank statements, itemized receipts, or credit card statements substantiating her 2015 Schedule C expenses.

III. Petitioners' 2016 Tax Return

Using married filing jointly status, petitioners timely filed their joint 2016 Form 1040 (2016 joint return) reporting Form W-2 income of $163,927. They attached Schedule A claiming deductions for medical expenses of $28,074 and unreimbursed employee expenses of $5,716.^[5]

Petitioners also attached Schedule C to their 2016 joint return for Mrs. Patitz's insurance business, reporting gross receipts of $955 and expenses totaling $39,350, which resulted in a business loss of $38,395.

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A. Schedule A Expenses

1. Employee Business Expenses

Petitioners attached to their 2016 joint return Forms 2106 reporting expenses deducted as Schedule A unreimbursed employee expenses, which are detailed below.

a. Vehicle Expenses

Mr. Moody reported 8,230 business miles and claimed a vehicle expense deduction of $4,444.^[6] He maintained a handwritten contemporaneous mileage log while traveling and subsequently transferred the entries into an electronic logbook.

b. Meals and Entertainment Expenses

Mr. Moody reported meals and entertainment expenses of $675. He did not provide any bank statements, itemized receipts, or credit card statements to substantiate these expenses. Moreover, he did not provide documentation indicating that his employment as a Blue Streak area manager required him to incur meals and entertainment expenses.

c. Other Business Expenses

Mrs. Patitz reported other business expenses of $79 but did not identify what they comprised. Mr. Moody reported other business expenses of $855. While this amount includes teaching expenses of $524, Mr. Moody did not otherwise identify the remainder.

Petitioners produced bank statements and itemized receipts relating to Mr. Moody's teaching expenses but did not otherwise provide any documentation to substantiate their other business expenses.

2. Medical Expenses

Petitioners deducted medical expenses of $28,074.^[7] They provided receipts indicating medical expenses on behalf of Mrs. Patitz's father, as well as medical expenses they incurred on behalf of themselves and their

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dependent children. Petitioners did not provide accompanying bank statements or credit card statements substantiating these expenses.^[8]...