If you follow Accountant on the Go on social media, you may have seen us posting some of our favorite questionable tax deductions we’ve heard about over the years. Some were actually approved by the IRS, but most are so ludicrous all you can do is shake your head. Here we’re taking a look at just a few of the dubious deductions that didn’t quite slip through.
1. A man with a failing furniture business decided to hire someone to burn it down. The store-owner’s plan was not only to collect the $500,000 insurance money, but also to deduct the $10,000 expenses of hiring the arsonist! He was denied. I’m sure it wasn’t too long before the police were also looking carefully at his return.
2. One business owner thought a case or two of whiskey would make nice client gifts, and tried to deduct them on his annual tax return. The category he chose was client entertainment. However, not only was it not allowed, it was a gift that violated state laws.
3. Maybe in Amsterdam or at the Bunny Ranch in Nevada, but you can’t deduct expenses of illegal professions. Trying to deduct 4000 condoms or push-up bras are no good if you put down “prostitute” as your career. Similarly, drug dealers can’t deduct the cost of baggies or soil for Marijuana plants.
4. Bodybuilders coat themselves in slick, black oil to give their muscles definition and sharpness. While it looks a little odd to people not in the profession, it is an expense that can be deducted from your accounts. While the oil may be essential, the three pounds of bison meat one bodybuilder consumed daily was not exempt, as it was not seen as essential for competing. One part-time fitness enthusiast wrote off the oil on his tax returns as a business expense. When the IRS rejected the claim, he took them to court and won.
5. Though it may be a business expense to some people, you can’t just go out and buy your own prize-winning horse, name it after yourself (the ego on some folks) and then take clients out to see your horse run. It’s not a business expense, it’s a personal expense. But hey, if you can afford a racehorse and stables, why are you worried about the deduction in the first place?
6. Someone decided to take clients and their spouses to the Super Bowl, but just could not prove that the shindig was in any way related to business. And even if it was, it’s an extravagant expense for a meeting and would have been disallowed anyway.
7. Back in the days of the Cold War and the threat of daily nuclear meltdown, one man built a fallout shelter on his property and listed it as “preventative medicine.” The IRS gave that one a big thumbs down, but he may have the last laugh should World War 3 actually happen.
8. Vacations are another expense that can get people into trouble. Disguising your vacation as a business trip will likely not work. Your vacation needs to have proof that you worked 8 hours a day and had effective business meetings. An accountant shared a story of a client that tried to deduct a $600,000 catamaran used to entertain their clients a few times a year. Another tried to deduct the cost of a cabin in the woods along with the snowmobiles required to arrive at the remote location.
9. Well, it wasn’t the buggy that was questionable – it was used for business and is a legitimate expense. It was the tricked-out accessories the young Amish man wanted to include on the write-off: dash lights, kick plates, tinted windshield, speedometer, hydraulic brakes and dimmer switches.
10. An allergic taxpayer tried to deduct the removal of carpets as a medical expense. It was denied — as was the cost of installing hardwood floors in their place.
Some of these are pretty outrageous, but you’d be surprised what the IRS may approve as a deduction. Before submitting anything like the above, however, we recommend reaching out to us.
At the core of our business are our tax and financial services. We are a highly experienced and knowledgeable team with clients in fields ranging from healthcare to high tech. We understand the complexities of the tax code and we’ll help you make informed decisions that will improve your profitability and cash flow. We’ve helped both Long Island and out of state businesses find solutions that enhance their bottom line and improve their financial outlook. Interested in learning more? Call us today at 631-547-8811 or learn more at http://acctgo.com.