Creative Deductions

I love creativity. It doesn’t matter if it is a work of art, a scientific or financial theory or a crazy tax deduction. Clients come in with those a lot. I listen to their idea, giggle a little and tell them “no”. I’m not talking about “my son’s girlfriend and her daughter lived with us” type question. I’m talking about the man who wanted to take his bar hopping as a business deduction. He was only doing it so that he could make sure that the other guys on his work crew didn’t get too drunk to work the next day. After all, he was responsible for his crew and could lose his job if they messed up too much. Nice try, but no!

An Iowa tax preparer couple should get an award for their $21million in bogus deductions the IRS has found on returns they prepared for some clients. According to the AP, Jill Schwartz-Musin and her husband Howard Musin have been banned from preparing tax returns because of their creativity. A few of my favorites:

• If your dog barks while you are away from you home business, it’s a business expense. (My guess-security).
• If your nanny answers your business phone, she becomes a business deduction.
• Over $6000 for a years worth of grocery were deducted on one return. (Entertainment?)
• Or, the legal cost from a bachelor party gone wrong. (No clue on the possible rational)

This was not a new charge for Ms. Schwartz-Musin. She was under IRS disbarment since 1987 for these kinds of acts. And in 2000, she plead guilty to obstructing the IRS. Of course, being the creative person she is, that didn’t stop her from filing Power of Attorneys for clients that said she was not under disbarment. What’s a little lie when you’re deducting invisible furniture for the client’s office?

While the Justice Department has not ruled out more legal action against the Musin’s, their clients are now dealing with the IRS. As one client said, they paid back more with penalties than the refund had ever been; the IRS “pretty much threw the book at us." I can’t get a whole lot of sympathy for the Musin’s clients. There may have been some who were victimized. But it has been my experience that when the preparer is that creative the client has a good idea what is going on.

Enough seriousness, tax preparers what are the creative deductions your clients have suggested or that you have read about? (But don’t breach confidentiality rules.) And non-preparers, what would your creative deduction be?

Comments

[Cindy Galford]

I have often thought of giving a prize at the end of the filing season for the most creative deduction. I do believe your bar hopper tops any that I have had. I always smile, sometimes laugh out loud and say that was a good try, but....No.

[Kim Kislak]

One client wanted to write off keg parties she had for "advertisement". She even wrote it on her itemized list of expenses and argued about it, when I told her NO.