Cat Lady's Big Win Against IRS Could Help Volunteers

June 17, 2011— -- When the Internal Revenue Service didn't purr over her tax deductions for her volunteer work as a cat rescuer Jan Van Dusen fought back and won.

Her victory is a case that could inspire more Americans to volunteer -- and increase charitable tax deductions by millions.

The "ruling sets a precedent for this type of deduction," says Philip L. Liberatore a CPA at IRS Problem Solvers, Inc. based in Southern California. "It's possible to not necessarily have a tax contribution letter but still have tax deductible expenses that are charitable in nature. This ruling will encourage other taxpayers to volunteer as a result it has the potential to add up to millions of dollars in deductions."

The Wall Street Journal originally reported the victory.

Which is what Van Dusen did for years as a foster parent to cats. However, it wasn't until her 2004 tax return that Van Dusen decided to claim the expenses she incurred while caring for as many as 70 cats in her house.

As a part of the nonprofit organization Fix Our Ferals Van Dusen participated in the Trap-Neuter-Return program to capture feral or semi-feral cats to be spayed and neutered. At times, this resulted in "foster cat" situations, which means cats staying at Dusen's residence.

Liberatore compares it to the foster child system. "The foster parent takes in the foster child and are able to deduct expenses" that exceed what they're getting paid, says Liberatore.

"I had a little more than I intended to have because I thought cats would continue to go up for adoption and they didn't," says Van Dusen.

But, when the family law attorney claimed expenses of $12,068 to care for the cats housed in her residence she found herself in US Tax Court battling the IRS.

The sheer number of cats earned her the nickname "the cat lady" in the media. In court, Van Dusen says she was painted as the "crazy" cat lady.

"Those of us who do animal rescue think of it as an avocation. It is not a hobby; it is more of a calling. It is definitely community service," says Van Dusen. "We go places where it is scary to be, and talk to people who are scary to talk to, to try to turn things around so that the animals are safe. If you are crazy, you cannot be effective. You need all of your faculties for this work."

At her home, she ran a well-oiled machine, shelling out about $1,000 a month for food, liter and flea control for the feral and semi-feral cats.

When the IRS denied her deductions, Van Dusen took them to court and the judge sided with the cat lover. In the ruling, Van Dusen was able to use copies or other documentation for expenses below $250. For expenses that exceeded $250, the court denied a deduction because Van Dusen didn't have a letter from the charity at the time aknowledging her gift.

The ruling has implications for volunteers and many animal rights organizations are celebrating the win.

"The ASPCA supports this ruling because it will enable animal lovers to do more for animals without having to worry about how it will impact their personal finances," Gail Buchwald, the ASPCA's Senior Vice President of Adoptions, wrote in a statement. "How much one spends in a single rescue can vary greatly from several hundred dollars to several thousand dollars, depending on the capacities of the shelters in the local community and the condition of the animal, among other factors."