Taxpayer asks:
Hi Kelly,
I had a tax question about unpaid internships and being able to deduct the expenses of that internship on your taxes. From all of the research I did I was unable to find anything that would allow for such a thing. It seems that without a 1099 or w-2 from the company the person doing the internship is inelgible for any type of tax break for the cost she spent to participate in this unpaid internship. A client of mine recently moved for a few months to work on an unpaid internship, and she has to pay to live while doing this intern.. She was wondering if any of those expenses are deductible.
Taxgirl says:
This is a great question. I had to think about it for a bit. Here’s what I think (I think).
The best chance for your client to claim a deduction would be as an educational expense. To be deductible as an educational expense, the expense must be for (1) education that maintains or improves job performance or (2) serves the purpose of the employer and is required by the employer or by law to keep salary, status or job, and (3) the education is not part of a program that will qualify for a new trade or business.
If your clients meet that criteria, then she can deduct tuition, books, supplies, lab fees, and similar items; certain transportation and travel costs; and other education expenses. Moving expenses, however, would not be included.
In fact, even if the client wasn’t a student and could prove that she qualified as an employee, a seasonal internship (paid or unpaid) wouldn’t qualify for a moving expense deduction because it would not satisfy the “time test” requirement piece of the moving expenses criteria.
If the internship was paid, the intern could claim certain expenses on a Schedule C or Schedule A. I don’t think there’s any good argument for claiming expenses against zero income in this case on a Schedule C (unless one of my colleagues wants to make it for me). But I do think you might have a decent case for itemizing some expenses on a Schedule A, Miscellaneous Deductions as unreimbursed job expenses. I think you can make an argument that an intern could be considered an employee despite the lack of compensation.
Of course, the icky part of the Schedule A deductions is that you have to itemize to claim them. I’m guessing that an unpaid intern is also not a homeowner and likely doesn’t have enough deductions to itemize. But if, if, if the intern is itemizing, I think a deduction under Schedule A, Miscellaneous Deductions would work.
To qualify as an unreimbursed employee expense, the expense must be:
- Paid or incurred during your tax year;
- For carrying on your trade or business of being an acquired in your trade or business; and
- Ordinary and necessary.
This was my best guess on this one – it’s a tricky question for sure. I’d be interested to hear what my colleagues think…
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook at http://www.facebook.com/taxgirl
Taxpayer asks:
Hi taxgirl,
I love reading your blog. I think you’re funny and insightful. I’ve learned more from your site than from a whole semester of tax law.
I actually just graduated from law school and I am really interested in writing for your site. I checked out the “about” and “find me” tabs but I don’t see any information about how you can apply for an internship. So, what does a soon to be lawyer have to do to work for you?
Taxgirl says:
Gosh. *blushing* Thanks so much for the kind words.
Wait a sec and I’ll forward your email to my staff… Done. And um, got it. You see, I’m taxgirl.com, the whole taxgirl.com. Just me. There is no staff. Nobody else writes or researches anything on my site as taxgirl. No ghost writers. No editors (clearly). No interns. And I don’t expect that to change any time soon, though I am flattered that you asked.
I do accept guest posts from other writers. You don’t have to be a tax attorney to submit something. I’ve published freelancers, CPAs and law students on my site – each of whom is clearly identified as a guest author when their piece is published. If you have something in mind that you’d like to work on and send (maybe a resume builder, since I’m guessing that you’re waiting for the bar results?), please do pass it along.
And that goes for everyone. If you have a guest post in mind, drop me a note. I don’t expect a thesis or a white paper but I do look for a well written piece that shows thoughtfulness and point of view.
Best of luck in your legal career and again, thanks for the charitable comments. I appreciate it very much!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
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The employee plans division of the IRS has hired two law student interns this year, the first time ever for this division. If all goes well, the plan may be expanded.
The two students are from the John Marshall Law School in Chicago but will work in the IRS Washington office for three months this summer. The students won’t be paid or receive a stipend (fairly normal for an internship) but will get school credit (also normal for an internship).
The IRS points out that law interns have worked in other parts of the IRS in the past. This is true. Count me as one of them. I interned at the Philadelphia office of the Estates Tax Audit Division in my final year of law school. Talk about getting some hands on training…
In this economy, this is a great opportunity for these students. As the IRS points out, it’s the best place to get exposure to whole regulatory process, from the legislative start to implementation of regulations in the field. You can’t get that kind of experience at any law firm.
The IRS is hopeful that this program might lead to further recruiting for the Service. I wouldn’t be surprised. In terms of IRS attorney positions, competition is tough – and in this economy, I’ll bet it’s even more difficult. When I was at IRS, we were told very frankly that the IRS basically tosses any resumes for the tax attorney positions from those without an LLM Taxation.
It appears, though, that the positions which the IRS hopes to woo may not be “attorney” jobs per se. The Service is already looking for revenue agents (see my Tax Jobs page) and tax law specialists. Agents who serve in such positions may have a law degree, but not all positions require one.
This is such a step in the right direction for the IRS. Rather than continue a culture of government employees getting government jobs, why not start poking around more in the private sector? Getting students enthusiastic about working for the IRS in law school will go a long way towards building up the pool of talent at the IRS. Maybe more tax students will see it as a first step rather than a last resort…
