Nurse Paves Way For IRS Education Deduction


Oftentimes it is ordinary people who bring about extraordinary change.

Lori Singleton-Clarke is one such person, a nurse who wanted to do her job better which meant pursuing additional schooling leading to a master’s degree. But what Lori wasn’t expecting was a personal battle with the IRS, one she eventually won along with what may become certain far reaching positive consequences impacting thousand of other students.

IRSThis past weekend The Wall Street Journal (Nurse Outduels IRS Over M.B.A. Tuition) recapped Lori’s battle where she defended herself in court against the big, bad Internal Revenue Service (IRS). The IRS went after Lori alleging that she had improperly deducted approximately $15,000 in business school tuition on her 2005 tax return.

Pursuit of Remedial Education

Ms. Singleton-Clarke was a student taking classes through the online University of Phoenix program, pursuing a degree–not to get a new job–but to be better equipped to handle her current one. Although the IRS allows tuition deductions in certain cases, the tax organization didn’t believe that Singleton-Clarke’s deductions met their narrow criteria.

In defending her case, IRS Publication 970 caught Singleton-Clarke’s attention as it offers guidelines on how taxpayers can take an education deduction if they are seeking to keep up with their studies. Typically, accountants and doctors qualify, people already established in their careers, but needing to stay current with changes in their fields, something that can be accomplished by taking additional classes.

IRS Steps Up the Pressure

But the IRS apparently didn’t have people like Singleton-Clarke in mind, who are also career minded folks wanting to remain competitive in their fields. The tax agency audited Singleton-Clarke, requiring her to submit a copy of her resume, a job description, and other records.

Overwhelmed and feeling intimidated, she pursued her case without legal representation because she couldn’t afford an attorney. But with firmness of purpose, Singleton-Clarke clearly outlined her defense, offering supporting documentation to prove her case.

In court, a pair of tax attorneys and paralegals were lined up on one side against Singleton-Clarke in November 2008, in front of a judge who later ruled in her favor. Although this victory applies to Singleton-Clarke specifically, it is likely to set precedent by allowing thousands of other students to claim a similar deduction.

The Clarke Decision

Clarke won her case because she was articulate and resolute. But she also stood on firm legal ground, demonstrating that she was not pursuing a new license or new line of work by seeking an M.B.A.

As far as the IRS is concerned, continuing professional education is fine, but most students who are pursuing an M.B.A. do so with an eye toward landing a new job. That wasn’t the case with Lori Singleton-Clarke whose employer did not require her to seek an advanced degree, something she thought would help equip her as someone who deals with doctors who occasionally run afoul of hospital rules.

Now that Singleton-Clarke has won her case, she’ll be immortalized too. Already legal professionals are referring to the case as the “Clarke decision” something that will likely be referenced in court for many years to come.

Photo Credit: Wikipedia public domain image


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