This is a Guest Post by Richard Close. As a former IRS Revenue Officer, Richard “stole” $10 Million for the IRS. Now he works to help American taxpayers. Richard writes IRS news and updates daily on his website, The IRS Hitman. You can find answers to common tax questions in his knowledge vault.
Ah, tax season. That time of year where people grouse about the greedy government. Some folks are so in need that they start looking for ways to cheat on their taxes. Here’s a hint: Never cheat on your taxes. The risks far outweigh the rewards. How do I know? Because I used to work for the IRS, and I saw first-hand what happened to tax cheats.
When people learn I used to work for the IRS, they want in on the secret. What’s the silver bullet that will help you save the most when you file your taxes? We all know about tax deductions, but which ones are worth the trouble? In my opinion, you should look at all of them. It may seem like you don’t qualify for most at first, but if you look closely for legal “tax cheats” or loopholes in the IRS rules, you may find new ways to save.
As an advocate for the American Taxpayer, I in no way condone committing tax fraud. However, there are ways you can make those tax “cheats” — legal tax deductions — work for you without dire IRS consequences. Be creative, but work within the law. You just might save some money this year on your tax filings. Here are some common tax cheats people try (and fail at), as well as legal alternatives.
Your pet is not a dependent, no matter how much you feel Fido is part of the family. Even if your pets run up expensive medical bills, personal pet costs are not typically tax deductible.
- Tax Cheat: However, if you have a service animal, you can claim the expenses of maintaining the animal as a medical deduction. Businesses can deduct qualifying pet costs, too. Here’s a clever example: The owners of a junkyard had to act fast to remove their snake and rat problem. Their solution was to set out bowls of cat food to attract feral cats. The cats made short work of the vermin, and the cat food was considered a legitimate business expense.
If your legal dispute is “personal” in nature, the IRS won’t allow you to deduct your attorney fees. This includes common issues like divorces, property disputes, and even personal injury cases.
- Tax Cheat: Attorney fees for your business are deductible (subject to a 2% floor). Oddly enough, you can deduct personal legal fees related to contesting, paying, or claiming a refund on your taxes.
You can deduct goods and cash donated, but you can’t deduct services you’ve donated to a charity — even if you measure the value.
- Tax Cheat: You can, however, deduct costs you paid while performing the service.
You can’t deduct the cost of your home telephone line, even you use that phone for your business.
- Tax Cheat: You can, however, deduct the cost of a second telephone landline or a cell phone that is used exclusively for your business. In addition, you can deduct long distance and similar charges on your land line if you prove business use.
You can never deduct the cost of going to and from work, no matter how far you live from the workplace. Even if your commute is expensive, the burden is a non-deductible expense.
- Tax Cheat: Work-related travel expenses are deductible. This includes costs to visit clients and vendors, going to a business meeting away from where you work, and traveling back and forth during the workday.
The IRS considers home improvements personal expenses and will not allow you to claim these expenses as tax deductions.
- Tax Cheat: However, if you’re installing a wheelchair ramp or making a similar health-related home improvement, you can claim the costs as medical expenses. Additionally, you can get a tax credit when you install qualifying energy-efficient home improvements.
Gym and Health Club Fees
Even if your doctor recommends you lose weight for your health, you cannot deduct expenses that are merely beneficial for your health, like gyms and health clubs. (The IRS says the same thing about specialty health foods.)
- Tax Cheat: However, if your doctor specifically prescribes a gym or health club membership for a diagnosed medical condition it will qualify as a medical deduction.
Two Top Tips
Here are two final tips for those who are looking to save on taxes:
- Itemize. Many taxpayers claim the standard deduction amounts, and I can’t blame them. There’s less math, less document hunting, and no rules to read. Yet with minimal effort you can maximize your deductions and save big by itemizing deductions.
- Pay a pro. Working with a tax professional or using tax-filing software is almost always worth the investment. A qualified and reliable tax professional will find the best ways for you to save.
Hopefully, these tax tips will help you save some cash this tax filing season. Remember, examine your taxes closely, and when in doubt, consult with a tax professional to see what you can and can’t deduct. You may be surprised by how greatly you can benefit from being a legal tax cheat.
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