The Minnesota Society of Certified Public Accountants (MNCPA) recently conducted its annual CPA member survey about the most strange and unusual tax deductions proposed by clients. Responses included everything from pets and wedding rings to gifts not given.
“Creativity is rewarded in many parts of society, but not by the IRS,” said MNCPA Chair David Stene. “There are always exceptions, but many of the deductions our members identified would’ve resulted in questions from the IRS had a CPA not encouraged tax filers to remove them from their tax returns.” “Claiming an error on your tax calculations because tax preparation software said it was ‘OK’ doesn’t cut it with the IRS,” Stene added.
Here is the MNCPA list of the best strange–and unacceptable*–deductions for 2013:
- A fur coat worn to promote a cleaning business: As one tax filer learned, you’ll never outfox the IRS. And, we can’t help but wonder, what would the fox say?
- A wedding ring: A diamond is forever, and so is a taxpayer’s inability to deduct the cost of a wedding ring.
- 101 dog deductions: Expenses for dogs, dogs as guard dogs, a small dog as a “burglar alarm,” dog adoption costs, and even a dog as a dependent. CPAs heard it all this year. That’s 101 “uh-uhs” from CPAs and the IRS.
- An ATV as a medical deduction for stress relief: No doubt, it’s fun to go out and let ‘er rip on the trails. But, the CPA and the IRS weren’t buying the ATV as a medical deduction in this case.
- Placing a business sign on a personal automobile and writing off the car as an advertising expense: The CPA had to put this message in bright lights: “Not deductible.”
- A family vacation: Ahh, the crystal-clear emerald water, the exquisite sand beaches, the cool ocean breeze. We hope the family enjoyed the vacation more than the tax filer enjoyed hearing the news that it wasn’t deductible.
- A $1 million dollar deduction for a contribution of land without an appraisal: Beauty may be in the eye of the beholder, but this generous donor learned the hard way that property value is not.
- Infant “employee”: Sure, you can bring your children into the family business and count them as employees. But, as one business owner discovered, children who can’t yet walk or talk rarely qualify. Plus, they want everything handed to them.
- A large charitable deduction for a gift not given: One taxpayer thought that everyone could deduct a certain percentage of their income as a charitable deduction. Good news: They can! Bad news: They need to actually make the donation.
- School lunches as a business expense: As one business owner learned, unless her child is closing business deals with other first-graders at the school, these lunches aren’t deductible.
- Claiming a home theater as “video conferencing equipment”: As soon as a CPA got her hands on this taxpayer’s return, that proposed deduction was “Gone with the Wind.”
- BOTOX® and tanning: One poor filer couldn’t even furrow her brow upon learning that these expenses weren’t deductible.