Like it or not, tax season is here. Many of us are scrambling madly to unearth deductions to slash our tax bills. There are many valid deductions available. You might be temped to be creative with your deductions – but that hardly ever works.
Check out these stories from financial professionals and CPAs, talking about the weirdest things their clients have tried to use as tax deductions.
Adult Services… Are Not a Deduction
“I have had clients try to write off escort services and AdultFriendFinder as a consultation,” says Donna Harris of Bookeeping Made Simple.
Edith Reads, Senior Editor at tradingplatforms.com has seen a similar situation: “One client attempted to deduct the cost of hiring a stripper as a business deduction. Unfortunately, the IRS did not see it that way. They denied him.”
What can we learn from this? Don't embarrass yourself by asking if escort services and strippers are tax-deductible. Even if an individual purchased the service on a business trip, it was not a necessary business expense.
Habla Español…Just Say No
“Personal travel to learn the language,” is not a valid write off, says CPA Jasmine DiLucci, JD, who owns her own firm.
What can we learn from this? While travel for business is a legitimate expense, the travel must be for conducting business. Trying to pass a vacation or holiday off as a business expense is not acceptable and could cost you big if you get audited. Flimsy reasoning like needing to learn the language will not fly with the IRS.
Blood, Sweat, and Tears Are Not Deductible
The IRS says volunteers who provide professional services for free to a qualifying nonprofit organization cannot claim a tax deduction for the value of income lost while you work as an unpaid volunteer for a qualified organization. But people still try.
“Over the years, clients have asked if they can take a tax deduction for the time they spend on charitable causes. One client gave me a spreadsheet of the time he spent on behalf of the charity multiplied by what he felt was his deserved hourly rate.” explained Gail Rosen, CPA, PC.
DiLucci has also seen it: “A client, who bills $300 an hour as a consultant, wanted to write his hourly wage off for volunteering at a charity.”
What can we learn from this? Giving your time to a worthy non-profit needs to come from the heart because it is not a valid tax deduction.
“I Do” Is a Deduction Don’t
Sometimes the explanations can get creative, says Edith Reads at tradingplatfoms.com.
“There was a client who wanted to deduct the cost of his daughter's wedding as a business expense. He argued that the wedding was a networking event and that he had met a lot of potential clients at the reception. Once again, the IRS was not convinced.”
What can we learn from this? While extravagant parties and weddings may appear to be networking, but the IRS does not recognize them as a business expense. Avoid the temptation of deducting them from your taxes. It will not work.
Purchases That Enhance a Person’s Image Are Prohibited
“A client tried to deduct the cost of her breast implants as a medical expense, but the IRS denied her claim,” continues Reads.
And not just personal enhancements – “I’ve seen clients try to deduct high-end personal expenses to maintain their images, like diamonds, fancy clothes, and handbags,” explains DiLucci.
What can we learn from this? There is nothing wrong with buying fine jewelry, designer bags, and expensive clothes. They just cannot be used as tax deductions.
Dubious Home Office Decor Doesn’t Score
Jenna Carson, Partner at MoneyLucid.com has an interesting anecdote.
“The strangest tax deduction request I had was an inquiry regarding a taxidermy collection. A client was collecting “stuffed” domestic animals such as cats and dogs. As this client rented out Airbnb‘s in his properties, he wanted to class his taxidermy as a home office deduction. Since his property was a money-making property, he believed taxidermy would increase its value.”
What can we learn from this? Rental properties are good sources of income. There are several ways to use them as tax deductions. Decorating with dead animals? Not one of them.
Items They Did Not Buy… Nice Try
DiLucci also mentioned one “clever” client, who “…wanted to write off gifted books at fair market value (FMV).”
What can we learn from this? Passing gifts off as purchases to secure tax deductions is shady. It is also almost impossible unless the person who bought it included the receipt. Enjoy the gift, and leave it off your taxes.
Paying taxes is a drag. These stories are humorous, but they make good points. Being brave, or careless, enough to attempt them can land you in hot water. Search for every viable deduction possible to keep as much money in your pocket as you can. You should draw the line at suspicious, ridiculous, irrelevant, and illegal claims.
Protect your karma and avoid getting audited. Keep your cat and everything else mentioned off your tax deductions.
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