How to cheat on your taxes legally

How to cheat on your taxes legally

tax tips on how to cheat on your taxes legally

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 and has had a partnership with Tax Defense Network and has offered advice on how to cheat on your taxes legally to GRS readers below.

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.

How to Cheat On Your Taxes Legally

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.

Pet Costs

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.

Attorney Fees

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.

Charitable Service

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: One way on how to cheat on your taxes legally is to deduct costs you paid while performing the service.

Telephone Landlines

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.

Commuting Costs

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.

Home Improvements

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.

Related >> See the home improvement projects that require a professional instead of DIY.

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 Tax Tips

Besides the ideas on how to cheat on your taxes legally above, 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.

Related >> Find out how much it costs to get your taxes done.

Hopefully, these tax tips on how to cheat on your taxes legally 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.

J.D.'s note: I just wanted to chime in on the value of taking the deductions for which you qualify. When I used to do my own taxes, I'd hunt for anything we could use. This didn't save us big bucks, but it saved us enough to make it worth my while. Now, though, I've learned that paying an accountant to do my taxes is well worth the cost.

 

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Pamela
Pamela
9 years ago

When I saw the title of today’s post I said to myself, “That looks like something that will be submitted to reddit.” 🙂

Anyway, I look at a lot of tax returns in my job. And the wealthiest people have the most complex returns–sometimes dozens of pages of schedules. I take two lessons from this:

1) the rich really do try to make every penny work in their favor, and

2) we need a more simple, progressive income tax in the U.S.

getagrip
getagrip
9 years ago

Two points. It’s probably just me, but I don’t like the word cheat being used for the recommendations. You tell us not to cheat on taxes, than use that terminology for your advice. Though I get it, it just seems bad form. Second, while many of the recommendations can be used, many can’t because it’s hard to reach the limits necessary to allow the deduction. So it would have been helpful if it was framed how useful they really are. For example, I seem to recall you can’t use the medical deduction until all your medical expenses hit something like… Read more »

John
John
7 years ago
Reply to  getagrip

This article is terribly FLAWED, not so much in content because these are legit things, but in presentation. Unless you are familiar with the tax code you might be wasting your time trying to itemize when the standard deduction is better for your particular situation especially if you don’t understand form Schedule A. In the end, unless you plan correctly, itemizing as an afterthought is not going to work for you on January 1 if you didn’t get all the deductions in by December 31. The only really good advice was talk to a tax pro, the rest is worthless… Read more »

slccom
slccom
5 years ago
Reply to  getagrip

The Government has helped us again. Now it is 10% for medical deductions.

Andrew
Andrew
9 years ago

I have used TurboTax’s Deluxe, on-line edition the past two years and have loved it. For $30, I know I got much larger refunds than I would have just doing it the old-fashioned way by myself. I highly recommened it. They explain all these types of deductions and make sure you don’t miss any.

Nicole
Nicole
9 years ago

Great post!

To add on to the work-related expenses… if you have to move for less than a full year for a work-related expense and it isn’t reimbursed by the company (say, for a semester-long or academic-year sabbatical), then those expenses including rent/hotel etc. are tax deductible.

Barb Friedberg
Barb Friedberg
9 years ago

My dad was a successful entrepreneur and schooled me early in the ways of maximizing ones deductions. Make it a habit and you will definitely benefit. The irs dot gov website has tremendous resources.

If you itemize, don’t forget to donate stuff to charity for a deduction!

Debi
Debi
9 years ago

I absolutely agree about hiring a tax professional. They are up-to-date on the latest tax law and the time, aggrivation, and frustration saved by using one is well worth the fee.

Wayne Mates
Wayne Mates
9 years ago

H&R Block has been offering “free” tax preparation for those that file 1040 EZ. I assume they try to sell you something else while you are having your taxes prepared.

Personally, I like using Turbo Tax. It is very easy to use, and makes figuring deductions a snap. And, the software does all the math and calculates the best way to file. Since I do my Mom’s taxes and the kids use it, it has been a great value. No, I don’t work for Turbo Tax!

For more complex returns, you definitely want to consult a tax pro.

Crystal
Crystal
9 years ago

We have hired a CPA the last 3 years, but she has gotten so expensive that we’ll be doing our taxes ourselves this year. I’ll have to remember to get together all of my costs while performing charity work…I sort of forgot that the toll road charges were deductible…oops. Thanks for the tips – I’ll definitely tune in later today as well. 🙂

Kevin M
Kevin M
9 years ago

This is not “cheating” – the deductions are written into the tax code or regulations and the IRS knows it. I think GRS is better than using loaded words to get traffic.

Attorney fees for your business – why not on Schedule C (or E as appropriate) where they are fully deductible? Maybe you have a different definition of “business”?

sarah
sarah
9 years ago

I don’t understand why you’re calling it a “cheat” if it’s legal. It sounds like you’re just trying to be sensationalistic and also CYA.

Wade
Wade
9 years ago

I agree that using tax software, like TurboTax, is well worth the cost. It makes things go much more smoothly and it always seems to get me a larger return than if I filled out the forms on my own.

I also agree that deductions should not be referred to as “cheats.”

Meredith
Meredith
9 years ago

Also, if you have diagnosed Celiac Disease you can get a tax deduction on all gluten free foods you buy – as long as you save the receipts and have a copy of your doctors diagnosis.
http://www.ehow.com/how_2089426_get-tax-deductions-food.html

SLCCOM
SLCCOM
8 years ago
Reply to  Meredith

Thanks, Meredith! I just told two friends about that.

Adam J
Adam J
9 years ago

I wonder every tax season, has anyone quantified the additional revenue the IRS has garnered over the years simply due to tax preparation software. It seems to me the IRS has collected a vast sum more than it would have, just by nature of making the filing process easier for the majority of Americans.

Des
Des
9 years ago

Kevin M says “I think GRS is better than using loaded words to get traffic.”

+1

These aren’t cheats, and they aren’t even particularly obscure. I am interested in tax code stuff, and I hope there will be more articles about it, but this didn’t really provide anything useful.

Tyler Karaszewski
Tyler Karaszewski
9 years ago

Last year, I did my own taxes. I paid about $3,500, and then I got a letter from the IRS claiming I owed them another $9,000. I hired a tax guy to deal with that, he cleared up the bill, and turned the $9,000 bill into a $9 refund. Guess who’s doing my taxes this year? That same guy. I had expected to be paying about $3,500 again, but he just went through everything and I’ll only be paying about $250. For me, a professional is *well* worth his fee of a couple hundred bucks to save me thousands of… Read more »

Brandon
Brandon
9 years ago

If people are looking for a way to learn these why not just take the H&R Block tax classes they offer? I did and I worked for H&R for a tax seson and it taught me all of those plus more. Then you have a much better understanding of how you can accomplish those nifty tax deductions.

Another tip is that with the newest version of college education credits you can claim part of your internet costs for school and other technology costs to you such as a new laptop or computer that you bought for school.

Scott
Scott
8 years ago
Reply to  Brandon

I went to an H&R block tax professional and was rewarded with 3 consecutive years of audits with 2 different IRS offices that had different opinions on what was prof and what was not. I had to spend another couple hundred dollars on a real accountant to fix the H&R block tax professionals return. Then hsbc bank sent me to collections on the interest for the rapid refund loan I recived. I was so mad and I thought they were H&R block that I told them to go F them selvs and good luck if they ever saw a dime… Read more »

Pat S.
Pat S.
9 years ago

I think if you are doing your own taxes, and getting this far in to the weeds, its time to see a professional!
Pat
http://compoundingreturns.blogspot.com

April Dykman
9 years ago

Hey guys, I’m just chiming in while a sunburned J.D. is in Africa and sans internet connection. I get the gripes about using the word “cheat.” I liked it in the title because the article discusses actual cheats and the legal alternatives, and uses quotation marks around “cheats”, but calling the alternatives “cheats” when they are legal breaks, and not using quotation marks around the word, can be confusing. I think it was meant more tongue-in-cheek. Also, J.D. and Tyler K. have inspired me to just use a pro this year, especially since my taxes are going to be a… Read more »

chacha1
chacha1
9 years ago

+1 on “cheat.” Don’t like it. Even though it’s clearly tongue-in-cheek and all the recommendations are legal, it reflects what I think is the single biggest failure of our society, which is that we are always looking for the easy way or the shortcut. We don’t need to pander to that here. I really recommend either taking the H&R Block course, or reading your way through the excellent IRS site, whether you do your taxes yourself or hire an accountant. The hardest part of doing taxes is compiling your records. And that is only hard the first time. The second-hardest… Read more »

Patrick
Patrick
9 years ago

I work at a CPA office and I can tell you that the software that is used (lacerte) is owned by intuit the same makers of turbo tax. having said that the tax code is not simple, and it is that way for a reason. if you take your return to one of those quick tax services, you are getting what you pay for the training is a couple of months at best. also there are many differences between the states and the feds when it comes to taxes so that can be a sure way to get yourself nailed,… Read more »

Suba
Suba
9 years ago

Those are not “cheat”s, they are regular tax deduction ideas. But other than that a nice list of easily overlooked deductions. Regarding medical expenses, the transportation (driving to/from the doctors office), lodging if it is for treatment, etc are all deductible. Charitable deduction – appraisal fees are deductible. There are a lot like these, computer depreciation cost if it is used for business, cell phone cost, investment advisory fee, safe deposit box used to store your investment, etc. Most of the common deductions, Turbo Tax or H&R Block software (NOT the people, I am not a fan of their “expert”… Read more »

Beth
Beth
9 years ago

Instead of “cheat,” I think you want “loophole.”

Not all tax experts are the same, even at the same company. But a GOOD one is worth double or more of their cost.

margot
margot
9 years ago

Can someone please clarify the following: Why is it worth paying a tax professional to prepare my taxes instead of just using TurboTax or some equivalent software program? I’ve used TurboTax for years, even as my taxes have gotten much more complex. Doesn’t the most recent software know as much, if not more, than a human brain about all the recent deductions? And TurboTax walks me through questions about every possible deduction, so I don’t feel like I’m missing something.

So, please shed light on why hiring a human can be better than tax software that I use myself. Thanks!

Kate
Kate
9 years ago

Margot, it depends on how complicated your taxes are. For most people (myself included), using TurboTax is more than enough. For others (like my dual-citizen husband who has to sync two disparate tax returns), it’s quite worth it to see a professional.

Leah
Leah
9 years ago

@21, My taxes aren’t all that complicated, so I do them in turbotax. But I definitely had to delve into turbotax to claim some stuff that they didn’t point me too. For those who talk about deductible medical expenses, I’m not even sure you get to deduct them if they are greater than 5-7% of your income. Or perhaps the IRS has a different definition of medical expenses. I pay my own health insurance, and the cost of premiums + dental appointments (considered a medical expense) are definitely more than 7% of my income. But when I entered all that… Read more »

margot
margot
9 years ago

This is the same person who asked why a tax professional was advantageous to TurboTax or other software. I earn a lot (over $200,000) and have some deductions. But, I still don’t see how a tax professional would know more or do better than software that’s programmed with all of the tax code. I’m happy to switch to a tax professional if someone can convince me it’s worth the money. Thanks for your help!

Dave
Dave
9 years ago

I was interested to find out that you can deduct education expenses (including books) related to your current job sphere (training for a new career path isn’t deductible). It’s subject to a 2% limit but if you take a part time course that relates to your current career it’s worth knowing about.

Amanda
Amanda
9 years ago

@18 April Be sure to use a CPA or Enrolled Agent. People at H&R block style places often only took a two week class and are a prepaper. I don’t consider that professional! @20 Different CPA offices use differnt software. @22 Professionals can help you with tax planning. If you “just” have a W-2 there may not be too many more deductions for you but they can help show you the tax benefits of different retirement plans, etc. Professionals also help determine which deductions are legal. A lot of people think they qualify for deductions that they don’t and end… Read more »

Wilson
Wilson
9 years ago

Personally, I like being able to know how to do my taxes and know how various expenses and transactions made over the year will affect me come tax time. Mine have grown increasingly complex so I’ve begun using the TurboTax Home & Business (I have rental income as my home is a double) for several years and have been extremely pleased with the results. I like to know about the various deductions myself but if I miss some it always points them out to me and then most importantly the next year I can begin keeping better records. I wish… Read more »

Jim
Jim
9 years ago

I prefer a professional; more precisely, an enrolled agent. TurboTax is OK for federal returns, but when it comes to state returns, especially my state (Calif.), the software takes a hard nose-dive into near-uselessness.

pgluth1
pgluth1
9 years ago

Speaking as an employee of the IRS, let me make the following observations: 1. Tax software is awesome. I see more problems with CPAs using a calculator and a pen than the average taxpayer with software. If your preparer doesn’t print out a complete copy of what is filed, and doesn’t explain every line, be wary. At a minimum, you should at least know what might be questioned. An efile signature page is not a full return. 2. As soon as you sign the return, you become responsible for your own taxes. The IRS will not go after your preparer.… Read more »

SLCCOM
SLCCOM
9 years ago

Wilson, I hope you don’t qualify to deduct those expenses! There is significant pain and suffering involved if you do.

Kirra
Kirra
9 years ago

My husband has a part-time position at a counseling clinic where he is considered self-employed and pays monthly rent to the clinic. Last year, at H&R Block we were told we could deduct his traveling expenses for driving across town to the office each day he has a client. Is that not accurate then? We plan on using the same person this year, but I certainly don’t want our filing messed up.

Gal @ Equally Happy
Gal @ Equally Happy
9 years ago

Sadly, we’ve reached the point where the tax code is about as complicated as the medical field. If you have no deductions, great. However, as someone who has a rental property, a side business and several other tax complications, I would never do my own taxes. Even software like Turbotax doesn’t help in those situations. Going to a professional tax preparer you trust makes sense, just like going to a doctor for a serious illness.

Wilson
Wilson
9 years ago

To #32 – Have you seen how much hospitals charge for every aspect related to child delivery? Almost all of it was paid for by insurance, but my wife blew threw the deductible of her high insurance plan in pre-natal care, visits, etc to get to that point and I believe that is deductible, unless I’m wrong about the perentage of health expenses v. income, only 2% right?

Julie
Julie
9 years ago

If travel expenses to / from work are not tax deductible, then why is there flexible spending for it, which ultimately allows you to take the cost of those as a “before tax” cost.

Will
Will
8 years ago

[pulling hair out over some of the comments above, and mounting soapbox] I am a tax professional with over 10 years of experience working with a broad variety of clients – from really ignorant to highly sophisticated. I have also worked for TurboTax in the past (but no longer do so). Here’s my two cents… If you have a simple tax return (i.e., no income other than a W2, interest, and dividends, and no deductions beyond mortgage interest, taxes, and charitable contributions), then using a software program is fine. Otherwise you should be using a tax pro. Really. The problem… Read more »

Becky
Becky
8 years ago

Hi, I just received an email from TurboTax late yesterday afternoon. The email said they wanted to advise me about an issue in TurboTax that may effect my 2011 Fed. return. Certain customers who received a child tax credit may have filed an incorrect return. Basically, their software gave people up to $1,000 child tax credit even if they entered ‘0’ for months the child was in their home! I have used the software for the past 4 years and trusted it. I called them and asked for help-they wanted me to sign a form so they could do the… Read more »

email marketing tools
email marketing tools
7 years ago

I typically don’t leave observations on websites but you have some good info material.

Source
Source
7 years ago

Good put up, thanks

Priscilla
Priscilla
7 years ago

Great article. Thank you for the valuable information that I can use to help my passion grow. Life pleasant surprises 🙂

Auto Rack
Auto Rack
6 years ago

I absolutely agree about hiring a tax professional.

commercial cleaning in Las Vegas
commercial cleaning in Las Vegas
6 years ago

Turn that faucet off as soon as you start brushing, shaving or doing
the dishes. End of tenancy cleaning is essential to speed up the process of finding new tenants.
However, if you need a cleaner for repeated use, you probably want to just buy one yourself.

sherry
sherry
5 years ago

We live in Alabama but we work on the road and can stay at a place up to 2yrs. Can we claim the home rental on our taxes for the period we lived there

Tina stover
Tina stover
5 years ago

What rd tolls on our way to work we pay 1200 a yr in rd tolls

John Clemmons
John Clemmons
4 years ago

I lost my home to forecloser an was sued for my second mortgage which after 6 years I was sued an outrageous amount. I’m being garnished for repayment because I was stupid an did nothing to stop it. anyway can I claim the second mortgage on my taxes since I was hit with penalties an interest.

Kasha
Kasha
4 years ago

The word “hack”, probably would’ve been a better choice vs “cheat”..it will definitely broaden the audience, IMO.

deanferraro82
deanferraro82
3 years ago

Your question has to deal with your tax home and it sounds like wherever you are for those two years would qualify as your tax home and would be a non-deductible personal loss. HOWEVER(!): If you work out of your home AND: 1. it is your primary place of business. 2. you work there for the convenience of your employer. 3. you maintain a separate room or space with only business tools equipment ie:no personal stuff in it. Then you possibly could take the home office deduction as an unreimbured employee expense on your Schedule A subject to 2% above… Read more »

peachy
peachy
3 years ago

can i file taxes. i had no income last year besides food stamps…but i have an 9 month old…???how do i get my tax return?

Mista Blacc'T
Mista Blacc'T
3 years ago

she’s a dependant

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