1. The home-office-with-view deduction?
One client tried to broaden Texas CPA Sean Duncan's perspective by floating $30,000 in backyard beautification as a home office deduction.
“I said, ‘Excuse me, what?’” Duncan says, referring to his reaction to all the zeros.
“She said, ‘That's the landscaping around my pool. You can see the pool from my home office window, and because my home office looks straight over the pool, it makes my home office prettier.’”
Duncan's response? “Uh, no; I wasn’t tempted. This is why people are audited for home offices.”
2. From Sallie Mae to Sallie nay
The controversial new tax law has dumped many cherished deductions but not the one for student loan interest. You can still write off up to $2,500 in interest paid each year to a student lender such as Sallie Mae.
Unfortunately, one client of New Jersey CPA Gail Rosen who had just graduated from college debt-free didn’t get the memo and amusingly felt left out.
“She said, ‘All of my co-workers are talking about this Sallie Mae deduction. What is it? And did you take it for me???’” Rosen recalls, chuckling.
“I told her to go right back to her parents and give them a big hug, kiss and thank-you for her not having a student loan and this Sallie deduction," he says. "She got it, and laughed, too.”
3. Wear your helmet, but forget the write-off
St. Louis CPA Joe Eckelkamp of the E&A CFO Group has seen a few shaky deductions crop up in the Missouri countryside.
For example, there was the off-roader that was supposedly being used for business purposes.
“One farmer client sought to write off his four-wheel ATV because it was ‘needed to check the fence lines’ regularly, and not because they used it for fun,” Eckelkamp muses.
Unsure about a deduction? H&R Block can help.
4. How to stay abreast of current tax law
When a client who worked as a sales rep at trunk shows wanted CPA Sean Duncan to claim her $14,000 bill for breast augmentation surgery as a business expense, he devised an ingenious way to talk her out of it.
“I understood why her sales increased," he says, "but that doesn't make them deductible." However, the woman just wasn't getting it, so Duncan had an idea.
"I finally said, ‘How about this? Why don't we consider treating them like a vehicle? Do you have a schedule of when you use them for personal reasons versus when you use them for business reasons?’"
He had made his point. "She gasped and said, ‘I can't do that!’ And I said, ‘Well, neither can I, because there’s no way to know when you're using them for business reasons versus personal reasons.’”
5. Sometimes it’s the little things
Effective tax filing is a painstaking process that at times can come unglued for the craziest reasons, as CPA Gail Rosen relates.
“I filed an amended tax return for a client close to the three-year deadline that allowed him to still receive a refund. When the refund had not been received for several months, I confirmed with him that he did in fact mail it certified mail, return receipt requested."
However, the man had overlooked a key step in the process.
"When I asked for his receipt to trace it, he said, ‘Oh, did I have to keep that?'" Rosen says. "Thankfully, the IRS didn’t end up needing it.”
6. Man's best deduction?
San Francisco CPA Larry Pon was stunned by one client's shaggy dog story.
“She brought in detailed records and receipts for her expenses for her dog. I asked what this was for. It was for deductions on her tax return,” he recalls.
The woman had seen an article about a plan to let people write off pet bills. But it had never gone anywhere.
"It was a proposal written by a Michigan congressman who was trying to get votes from constituents with pets," Pon says. "What politicians do for votes!”
7. Ex, ex, ex
Think tax season craziness doesn’t inspire a little levity among accountants?
New Jersey CPA Edward Mendlowitz of WithumSmith+Brown proves otherwise.
“We have a client that is paying alimony to three ex-wives. On the line where you list the Social Security number of the person receiving alimony with the amount paid, we write ‘Schedule attached.’”
In other words: We're gonna need more room!
8. Sometimes the joke is on the IRS
As much as tax risktakers like to press their luck with Uncle Sam, occasionally it’s the truly generous who raise a flag with the IRS. This happened with a client of New Jersey CPA Christopher Arun Kumar of Breakpoint Assurance Co.
“I was doing the tax return for a basketball player on the New York Knicks and he had about $40,000 in charitable deductions,” he relates. “I told him, ‘Before I do your return, I want to make sure you and I are on the same page.’"
The man showed he had checks supporting the $40,000, and letters from each church. But the IRS didn't believe anyone would give away so much money, and it asked to see documentation.
"I just forwarded the copies and the matter was closed," Kumar says. "The client was making half a million dollars, and for him, $40,000 was nothing.”