By: Coleman Jackson, Attorney, CPA
June 14, 2016
Are you a tax turtle? What exactly is a tax turtle?
Typically when we think of the term “home”, we are thinking about where a person resides. Home is where a person personally lives; but in U.S. tax law, this is not what the term “home” means. In tax law, the term “home” means where the taxpayer has his principal place of employment. If a taxpayer does not have a principal place of employment, tax law defines “home” as where the taxpayer incurs substantial continuing living expenses. Barone v. Commissioner, 85 T.C. 462, 465 (1985), aff’d without published opinion, 807 F.2d 177 (9th Cir. 1986).
When a taxpayer is constantly on the move (such as long haul truck drivers and other drifter types); quite often, these taxpayers are considered “tax turtles” in U.S. tax law. A tax turtle is someone who carries their home on their back because they are in constant motion. Such a person could find it difficult to satisfy the high hurdle of showing that they are entitled to travel expense deductions under IRC 162 because they have no stationary place of business nor place where they incur substantial continuing living expenses. If challenged by the IRS, the turtle taxpayer bears the burden of proof that they do not carry their home on their back.
Some of the factors the IRS usually use to decide whether a taxpayer is an itinerant are:
- The business connection to the locale of the claimed home;
- The duplicative nature of the taxpayer’s living expenses while traveling and at the claimed home; and
- Personal attachments to the claimed home.
Taxpayers who move around a lot need to do proper due diligence before taking any tax return position related to traveling expense deductions because the taxpayer could be exposed to penalties. Taxpayers could potentially avoid penalties if they can show that they relied on the advice of a professional tax advisor.
This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.
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