This annual victimization may be unavoidable, but enterprising folks know they don’t necessarily have follow the tax code to the letter.  Loopholes abound when some critical thought is applied.  The following are examples of deduction attempts that overlook the tricky "thought" part.

 

 

A qualifying dependent must meet certain criteria.  They must be under 19 years old, live with you at least half the year and they must not provide more than half of their support.  This is why it is critical that all child labor be paid as little as possible, because doing otherwise would be a potential tax liability to their parents.  You can even claim a dependent that has been kidnapped up until their 18th birthday, which oddly incentivizes not paying the ransom.

 

A Wyoming DJ took a slightly broader interpretation of the term.  While reviewing the DJ’s prior tax retunrs, his CPA found his client had been claiming his dog, Red, as a dependent to avoid owing taxes.  When reached for comment, Red smirked "I am dependent on NO ONE" and illustrated the point by licking his own balls.

 

 

 

The IRS understands that it takes money to make money, despite Federal insistence that it’s just easier to print more.  By setting up special allowances and business-specific deductions, they can help the economy grow.  That way when it implodes later this year it will be WAY more impressive.

 

For example, cost depletion bases an allowance on the original cost of the income-generating property.  That’s why it was so hard for Manhattan CPA Marc Albaum when he had a client that wished to use income from sperm donation as a "depletion allowance".  This would have worked if the penis in question were actually an oil well, effectively meaning only Peter North could claim it.

 

 

 

Independent consulting fees are also an acceptable form of deduction, provided that you are leveraging them in very specific circumstances.  It’s hard to structure exactly where that’s applicable, but a good rule of thumb is not if they are commiting a crime while doing so.

 

A Raleigh CPA shared the story of a client who, after years of trying unsuccessfully to sell his furniture store, hired an arsonist to torch it.  Proving as always there’s no problem that can’t be burned, the insurance company paid out. 

 

 

He was scott-free until he also deducted a $10,000 "consulting fee" he had paid the arsonist. An IRS audit two years later landed them both in jail.

 

Another CPA named Ed Mendlowitz had a businessman client wanted to deduct the cost of entertaining clients.   This is usually a legitimate deduction for businesses, provided the expense doesn’t have a line-item of "$50 –  handjob in restaurant bathroom".  The CPA informed him that if he wanted to use a prostitute as a consultant, he would have to supply her with a Form 1099 to support it.  He declined.

 

 

 

Assets naturally lose value over time, like business equipment or wives. Depreciation can be claimed on cars, homes, computers and even farm animals.  Someone in the IRS literally had to come up with an ostritch depreciation algorithm, further demonstrating how well our tax dollars are spent. 

 

In one notable example of upkeep was found by a CPA reviewing $2,000 expense in his client’s books for "repairs and maintenance".  Unfortunately, he couldn’t file it as it was a check written to his client’s gynecologist and she wasn’t a professional vagina. 

 

 

There is precedent for getting a tax break on breast augmentation, but the IRS will only pay the refund with tightly creased singles.