Crazy Tax Deductions

EP 52 - Crazy Tax Deductions

 [00:00:00]

Thank you for joining us on our wacky Wednesday show. Where we take a break from the normal serious tone and discuss the wacky wild, weird, and sometimes very unusual financial world. Our goal was pretty simple. We want to find some humor along our financial journey.

So today we're going to discuss crazy and unusual tax deductions. That have landed taxpayers in hot water with the IRS.

And trust me, folks, that is not where you want to be. My goal today is I hope that [00:01:00] you find these outlandish tax deductions.

Funny. But maybe we can sprinkle a little tax guidance as we go. So let's jump right into it. Before I start, let me remind you that our show notes are available at our website. That's askralphpodcast.com.

I'm also going to ask you to join our email list. So that you'll know when we release our latest episodes and we'll also be able to share some great content with you.

So without further ado, let's get to the crazy and unusual tax deductions.

This one's a real ringer folks.

Extravagant wedding expenses.

A, taxpayer deducted the cost of their lavish wedding. Claiming it was a business expense for networking purposes. needless to say, the IRS disallowed the deduction, and the taxpayer had to pay back the disallowed amount, plus penalties and interest.

I guess those wedding bells did not ring as strong for those IRS agents.

Moving right along.

How about pet care expenses?

A [00:02:00] taxpayer actually tried to deduct the expenses of their pets care. Including grooming, food, and veterinary bills. Claiming that the pet was a "guard dog" for their business.

Now actually I've had some clients that have tried this. Well, in this particular case, that deduction was denied by the IRS, resulting again in additional taxes, owed and potential penalties.

So until you can get a social security number for your pets, I guess you better not try that deduction. Well, here's one.

I've had a lot of clients ask me about, and that's luxury car deductions.

A, taxpayer attempted to deduct the full cost of a luxury car as a business expense. Claiming that it was essential for their business image. Again, disallowed by the IRS leading to a high tax bill. And some penalties.

The truth is folks. I would like to write off that Ferrari's a business expense!

as well.

Well, let's talk about vacation expenses. Some taxpayers have actually tried to deduct extravagant vacations as business expenses. Arguing that they were there for research [00:03:00] or networking purposes. Well, I'll tell you this, the IRS,

didn't take the trip. But I personally feel like I need a trip to Hawaii now. Maybe it's some research for the podcast.

Well, how about this one?

Bodybuilding expenses. A, taxpayer deducted expenses related to bodybuilding, including gym memberships, supplements, and personal training. Claiming that it was necessary for their job as a fitness model. You know, I could argue on this one, actually, this one's not as funny as it might seem, but the IRS disallowed this deduction. And assessed penalty and interest on this case as well.

Well, how about this one?

Folks, a swimming pool deduction. A, taxpayer tried to deduct the cost of a swimming pool. Arguing that it was necessary for medical purposes. Again, the IRS, disallowed, this deduction resulting in a tax bill and potential penalties.

As a note. That's where I'm going to talk about something. It might be useful to you. You might be able to get a prescription from your doctor for a hot tub, or [00:04:00] spa or a , single person, swimming pool. You just need to make sure your doctor writes that script. So this one may seem kind of unusual and wacky but. You may actually be able to make this work.

Well, how about personal clothing deductions? And I get this question asked to me all the time. Some taxpayers have attempted to deduct personal clothing as business expenses. Claiming that they were necessary for work-related purposes. And I will say this, the IRS typically disallows these deductions, but I have to admit that I've been asked this by clients in the past, and I've actually seen this taken on tax returns. I've reviewed. Now the thing that you need to look at is if it's a uniform. And it's absolutely deductible, but not your standard everyday clothes. So what I tell clients. Is if these are clothes you can wear out to dinner on Saturday night, probably not going to be deductible. But if it's a uniform, it probably is deductible.

Let's move on to the next one.

Illegal activities.

Taxpayer's involved in illegal activity, such as drug trafficking or money laundering, have tried to [00:05:00] deduct expenses related to their illegal operations. Again, the IRS disallowed these, but I will note. You better declare that income from these illegal activities or you're committing tax evasion. And that could land you in jail. Just look what happened to Al Capone.

Now we move on to gambling losses.

When you're not so lucky. While gambling losses can be deducted. Some taxpayers have tried to deduct losses without proper documentation or proof of winnings. Again, the IRS disallowed, these deductions, resulting in additional tax and steep penalties. So what's my advice. You better save all those losing lottery tickets. Bingo cards and make sure you get a loss statement from the casino. It's really important folks.

How about this?

How about sailing away on a yacht? One taxpayer attempted to deduct the cost of a yacht. Claiming it was essential for their business as a travel blogger.

All I have to say on this is I guess that tax deduction just sailed away. Well, that was bad.

Wasn't it? [00:06:00]

While we're talking about travel.

How about first-class travel? Some taxpayers have tried to deduct the cost of first-class airfare, luxury accommodations during their business travel. Arguing that it was necessary for their comfort and productivity. So. You better take that coach seat? And not push your luck. friends.

How about dining expenses or more aptly said, how about fine dining expenses?

Taxpayers have attempted deduct the cost of expensive meals at high-end restaurants, claiming that it was necessary for networking or business purposes. Now this thing, you need to understand folks. The IRS is going to scrutinize these deductions and may disallow, excessive or lavish expenses. so you better plan those meals at more affordable spots.

I feel like Applebee's or cracker barrel or more in order.

Well, how about extravagant gifts.

Some taxpayers have tried the deduct, the cost of extravagant gifts, such as luxury watches. Or designer handbags. claiming that they were business-related expenses. the IRS [00:07:00] generally disallows these deductions unless they meet specific criteria for business gifts. Well, I got to break the news to your folks.

Oh, well, I guess that Rolex watch giveaway to all my podcasts. Listeners is not going to fly. I tried.

How about extravagant home office deductions. Some taxpayers have tried the deduct excessive expenses related to their home office, such as designer furniture or elaborate renovations. The IRS typically allows deductions for actual unnecessary expenses, but disallows, excessive or unnecessary expenses.

So, what I say to you on this one is you better stick to those Ikea furniture items, folks. And last but not least.

How about lavish business conferences?

And we've all seen these individuals have attempted to deduct the cost of attending extravagant conferences or seminars held at luxury resorts, arguing that it was a necessary for professional development. Well, the truth is the IRS may disallow portions, of these deductions that are deemed extravagant are excessive. And I will only say this. Maybe this one is not so [00:08:00] clearly a problem based on some of the most latest convention invitations I've seen.

In each of these cases, the taxpayers face consequences, such as owing additional taxes. Penalties, and interest. Some cases even resulted in criminal charges for those involved in illegal activities. So before you think about taking one of these outlandish wild or wacky or unusual tax deductions, It's really important. You consult with a tax professional. And adhere to IRS guidelines when claiming deductions to avoid potential pitfalls or issues with the IRS.

So we're at the end. Now I want to remind all of you to visit our podcast page. That's at askralphpodcast.com.

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by clicking on the microphone down the bottom. Right. We would love to hear from you. You can also check out our show notes or anything we share today. And a personal plug. If you're looking for tax advice. You could go to my website again, [00:09:00] askralphpodcast.com/store. And you can book a consultation with me and I'll help you figure out how to keep yourself out of hot water with the IRS. So I hope you enjoyed our discussion of some inappropriate tax deductions. Thank you for tuning in, God. Bless, you and stay financially savvy.