You’re working on your tax return and discover that you are that close to shaving a few more dollars off what you owe Uncle Sam.
Many in this situation are tempted to get creative. Don’t. The Internal Revenue Service has seen it all. OK, most of it.
The bottom line is that sketchy tax deduction claims are invitations to IRS auditors.
Crazy and possibly costly tax break claims: Earlier this year before Tax Day got pushed to July 15 by coronavirus precautions, Washington Post financial columnist Michelle Singletary talked with some tax professionals about the wild write-offs they’ve seen.
Singletary cites some of those brazen tax fudging ideas in her article “People try to claim the darnedest tax deductions to reduce their bills.”
I won’t spoil the article, which is one of this weekend’s Saturday Shout Out honorees, but yes, many of them involve so-called business claims. And I suggest you check out the readers’ comments, too.
Some odd, but OK tax deductions: Now I’m not saying don’t deduct, just do so wisely and within the law. Even the IRS says you can and should take all the tax breaks to which you are legally — I repeat, legally — entitled.
And there are some tax deductions that look at first glance to be a bit iffy, but to which the IRS said, OK.
Matt D’Angelo details just such situations in his Business News Daily article “Crazy Tax Deductions Allowed by the IRS.” That piece earns this weekend’s second Saturday Shout Out.
The IRS’ maybe/maybe not decisions when it comes to curious tax deductions also prompted Shannon Ryan, a Certified Financial Planner, to provide a visual tax write-off take. The image at the top of this post is from Ryan’s crazy tax deductions infographic, which get this weekend’s third shout out.
Audit implications: Also remember that when you do claim anything, be it a commonly accepted tax deduction or one where you’re a little aggressive, be sure to have the documentation to back it up if the federal tax collector does eventually raise an eyebrow.
When it comes to audits, it’s the opposite of our legal system. The IRS presumes you cheated and you have to prove that you most definitely didn’t. If you can’t, you’ll end up owing not just more tax, but also penalties and interest.
So consider your quirky claims carefully.