Tax regulation is dizzyingly complex. Accountants spend their entire careers navigating the rules, helping keep their clients out of trouble and maximize their list of deductions.
Nobody wants to pay more than their fair share of taxes. And with the thousands of claimable items, many tax pros have seen more than their fair share of strange deduction attempts.
Surveying more than 700 small business owners and accountants, nearly 40 percent of the tax pros said mixing personal and business expenses is the most common mistake they see small business owners make that results in an IRS audit.
While some claims are totally legit, several are absurd. Many of the accountants surveyed reported that some clients tried to write-off things like manicures, lingerie, and even child support.
Here are some of the craziest attempted deductions accountants saw this past financial year included:
1. Personal care was the most common write-off attempt. Of those surveyed, 64 percent saw line items for things like massages, manicures, plastic surgery and clothing.
2. Vacations were a biggie. Nearly half of the accountants surveyed said clients had tried to write-off holidays including cruises and Vegas jaunts.
3. Extravagant outings made the list with helicopters, boat rides and spa trips all listed as attempted deductions.
4. Home improvements, with a third of accountants surveyed listing additions like movie rooms, hot tubs, game rooms and even a kegerator making the strange deduction list.
5. Children’s gifts, tuition, clothes, babysitters and even child support was attempted by some individuals, a quarter of accountants surveyed said.
6. Too tired to cook claims. Meals on business trips are a pretty common deduction, however, daily Starbucks or attempts to claim restaurant visits “because they were too tired from working”, were also listed as crazy deductions that crossed accountants’ desks this past financial year.
7. The cost of getting married was listed as another strange tax write-off attempt.
8. Doggy day care. Pets, pet food, pet daycare, pet insurance and pet grooming were all listed by nearly 30 percent of accountants surveyed as attempted write-offs their clients made.
When it comes to managing finances just 14 percent of small business owners were focused on separating business and personal finance expenses. Muddling up potential deductions can pose a substantial problem during tax season: Many small business owners are either missing out on potential deductions or attempting to claim write-offs that aren’t allowed.
Working with an accountant and keeping clean, detailed records can take the pain out of tax time. Help you avoid an IRS audit and maybe even improve your take home income.
Article courtesy of Xero