This is crazy! It's even crazier that there are actually people who tried to do these. Not sure which is worse, the arsonist or the marijuana case. Lol
People are always trying to get creative with their tax deductions, but the IRS does not always go along with them. Filers have tried to deduct everything from prostitutes and pornography to pets and lavish holidays. But the IRS has been quick to put the kibosh on some of the truly outlandish deductions. While there are many loop holes in the tax law, trying to claim your cats and dogs are strictly verboten. On the other hand you can claim your carrier pigeons. Each year the IRS wades through a smorgasbord of crazy deductions. The following are some of the weirdest ones that the IRS audited and rejected.
1. A New York lawyer tried to write off over $110,000 he spent on porn and prostitutes, claiming it was part of the medial treatment he needed for his osteoarthritis. The IRS was neither aroused nor amused. They pointed out that prostitution was illegal in New York and his deductions were rejected.
2. A rock band listed over $100,000 in drug expenses as a travel and entertainment expense claiming that recreational drugs are an important part of their normal ‘ necessary and ordinary expense.’ However their accountant pointed out that illegal drugs are not a deductible expense. So neither illegal drugs nor sex with prostitutes is an acceptable deduction to the IRS.
3. Another tax payer who was losing money on his business paid an arsonist $10,000 to burn down his furniture store. After collecting a huge insurance settlement, the business owner attempted to write off the $10,000 as a business expense. The businessman was audited and he admitted what he had done. The company was fined $6,000 and both the business owner and the arsonist were arrested.
4. A businesswoman tried to write off the expenses associated with feeding and clothing her child. She had used the child in some of her advertising and claimed the $26,000 she had spent on taking care of the child was a business expense. The IRS disagreed. They allowed her to deduct only the cost of the photographer and the outfits the child wore in the ads.
5. Pole dancing isn’t a legitimate business expense unless you are a stripper. This is essentially what the IRS told a businessman who tried to write off the $800 his wife spent on pole-dancing classes as an entertainment expense. I am sure it was excellent entertainment for the businessman but the IRS did not see how this was tied to the business.
6. One businessman took his entire family to Hawaii to celebrate his daughter’s 16th birthday then tried to write it off as a business expense claiming it was a family owned business and this was employee entertainment. The IRS rejected this one pretty quick.
7. Another businessperson attempted to write off a Brazilian vacation as a business trip because he purchased some spatulas for his painting business while there. Although you can write off tools of the trade and business trips, the IRS did not seem to think that he really needed to go to Brazil for the spatulas. In the end he was able to deduct the spatulas he purchased, but not the trip.
8. Maybe he had been getting high on his own supply, but a marijuana dealer filed his tax return claiming the cost of running his marijuana business as a business expense. The IRS had not been smoking pot. They denied his deductions and the government arrested him and seized his assets.
9. Another businessman tried to write off the cost of his daughter’s wedding as entertainment for his clients because several of them were at the wedding. His claim was categorically denied.
10. One person claimed the cost of a new tattoo as a medical expense. Unfortunately the IRS did not view it the same way and denied it claiming that this form of self-expression was a completely optional procedure.
11. Another person claimed the cost of their fallout shelter as ‘preventative medicine’. The auditor did not see it the same way.
12. One man in Fresno, California attempted to claim his hair transplant as a medical expense. This was quickly denied, but I hope the auditor at least commented on his nice new hair.
13. And then there was a woman from Dallas who was furious when she was told that her $14,000 breast augmentation could not be listed as a business expense. Then later said that the only reason she spent that much was because she was sure it would be a tax deduction.
Ending on a Win, albeit an interesting one.
14. The IRS also denied the claim of a Massachusetts man who wanted a deduction for his sex reassignment surgery. However, the U.S. Tax Court ruled in 2010 that the man who had a sex change to become a woman should be allowed to deduct the $25,000 he paid for the sex-change operation.
Still every tax payer would be wise to heed the age old saying that goes,
‘Don’t mess with the IRS’
Nobody wants to get an IRS audit, but it does occasionally happen even for some non crazy stuff like when when Jeremy was audited by the IRS. There are a lot of good tax write offs that you should take advantage of, but I would consult with a tax professional and have them prepare you taxes for you to avoid the headache of dealing with the IRS, especially if you have some interesting things to write off.
Here is some more information on how to file your taxes online for free, as well as more on using H&R Block or TurboTax.
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About the Author: KC Beavers is a semi-retired entrepreneur. The subject of personal finance has always fascinated him. In an effort to not bore those around him with all his love of personal finance as much he has come here to bore all of you instead. Be sure to follow KC on Twitter or Google+.
@RFIndependence I have heard the IRS is only able to audit 1% of all the tax returns coming in, so I image a lot goes unnoticed in the end.
Some of these are so funny! Telling the government about your illegal activities, Foolishness!!! LOL
@StumbleForward It would be fun to find out, but this story was listed by a CPA and they have that whole client confidentiality thing, so who knows.