Benjamin Jones Tax Research Memo

Tax Research Memorandum

To: Benjamin Jones

From: CPA

Date:

Re: Tax Deductibility of CPA Review Course

Fact(s):

You are a new staff accountant for the Local Firm CPAs, LLC. To help you pass the CPA exam you took the CPA exam review course. The course cost is $2,500 and the firm expects you to take and pass the CPA exam.

Issue(s):

Can Benjamin deduct the course cost on his federal income tax?

Authorities:

IRS Publication 970, CH. 12

Analysis:

It is documented in the IRS Publication 970 that you can deduct qualified education expenses during the year for yourself, a spouse, or a dependent if the expense is for a higher education. One exception is that you cannot claim this deduction if you are filing status is married filing separately.

The requirements that qualify as a deduction for a work-related education is:

▪ Your employer or the law to keep your present salary, status or job requires the education. The required education must serve a bona fide business purpose of your employer.

▪ The education maintains or improves skills needed in your present work.

If your employer or the law does not require education then it can be qualified work-related education only if it maintains or improves your skills need in your present work. Expectable courses would include refresher courses, courses on current developments and academic or vocational courses. Review courses to prepare for the certified public accountant (CPA) examination does not qualify as a work-related education (IRS Publication 970, 2013).

Conclusion:

This particular issue dealing with non-reimbursement of CPA exam review course fee and the ability to deduct it on this year’s federal income tax. I have researched this problem found out that education expenses are considered work-related if it meets at least one of the two requirements (1) the employer or the law requires it and (2) the education maintains or improves skills needed in your present. Under the...