Taxing Lessons From Court Decisions

SALY and JLLY

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The acronyms sound like characters in a kid’s story, or a recipe for some sweet treat. In practice, they’re accounting shorthand for Same As Last Year and Just Like Last Year, both terms that mean the same thing–we’re doing it this way because this is the way we did it before.

One problem: SALY and JLLY are an excuse for not changing. Just because “we’ve always done it that way” doesn’t mean it’s always been done right, or that the method can never be changed.

SALY and JLLY can cause problems when you’re working with tax returns, too. That’s because taxes are calculated using an annual accounting system. While you’re not required to forget what happened in prior years–and should not–each tax year stands on its own and must be separately considered. The IRS is not bound in any given year to allow a deduction permitted for a prior year.

In T.C. Memo. 2012-200 (Saunders), the taxpayer relied on the fact that he’d deducted in prior years–with no questions from the IRS–commuting expenses incurred while driving from his home to a series of temporary workplaces.

Unfortunately, the expenses met none of the exceptions to the general rule that commuting expenses are nondeductible. Despite the allowance of the deductions on prior year returns, the IRS was not required to accept them during the year in question (2007).

The result: Disallowance of $23,121 of unreimbursed expenses.

Taxing Lesson: There is nothing wrong with change, if it is in the right direction.

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