Can the sole officer and employee in a corporation require himself to obtain a CPA license for employment?

I know that one of the requirements for being able to deduct educational expenses, regardless of whether or not it qualifies the employee for a new trade or business, is that the employer requires the further education in order for the employee to retain his/her current employment status. In this case, the employee in question is the sole officer and employee of an S corporation. He has an Illinois Real Estate Broker's License and decided that it would be beneficial to also obtain a CPA license to use in conjunction with the RE Broker's license. Can he require himself to obtain a Master's of Science in Accountancy degree to get the 30 qualifying hours for the CPA exam, thus allowing him to deduct the expenses?

Can the sole officer and employee in a corporation require himself to obtain a CPA license for employment?
The employee is making things very difficult for himself here. The requirements outlined relate to being able to deduct education expenses as a job-related expense on Schedule A. This would, of course, be subject to the 2% of AGI floor. One would also have to demonstrate the link between obtaining the degree and the employer's business.





The solution is simple. Claim Lifetime Learning Credit. To obtain the credits that will be acceptable to the employee's state Accountancy Board will almost certainly require him to attend an accredited institution (although there are a few very good schools who do not qualify). The only issue is that there are AGI ceilings above which one cannot claim the credit. However, if the employee has such a high AGI the 2% floor for deducting on Schedule A will be correspondingly high, thus limiting the deduction in any case.
Reply:Theoretically, any corporation (S or otherwise) has by-laws. If he puts the


requirement into his by-laws, then he would be required to adhere to


those laws and/or face whatever punishment is built into the by-laws


(if any). Or ... be sued by the Corporation. He'll have to take that up with


the Corporation's CEO :)





That being said, the IRS would be the deciding factor here as to whether


or not the process of adhering to the by-laws would justify a tax deduction.


With such a small corporation, its not clear to me if the IRS would


"pierce the corporate vale" and make him adhere to the IRS laws


about training for individuals (which can sometimes be deductible, but


not always).





Remember that the by-laws of a corporation are not laws in the state


sense - they merely state the normal operating procedures for the company.


At best, failing to adhere to by-laws gets you a law-suit, not a jail term.





That being said, if you failed to follow by-laws in pursuit of some sort


of state crime (say, larceny), the failure to follow standard procedure can


be used as evidence against you in state proceedings.
Reply:You have a number of issues. If the corporation is paying you to go to school you have the benefits to a 2% shareholder issue.





If you wish to deduct as a work related expense the problem is that a CPA license will qualify you for a new line of work and is not a requirement of your current job.





I think the best choice is to structure things so you can use the Life time learning credit.