Melody Hobson for CBS Money Watch writes: It's hard to think there's anything funny about taxes
when you're under a mountain of paperwork, but CBS News contributor and
analyst Mellody Hobson has a little comic relief for taxpayers. In all
her research about taxes, she came across some fairly ridiculous write
offs the IRS has allowed -- and some crazy things people have tried and
failed to slip by the IRS.
First, you'd be amazed about
what people try to write off concerning their pets, and it's no wonder
why -- they're expensive. According to the ASPCA, dogs and cats both
cost over $1,000 a year. There was the case of the woman who claimed an
unusually high amount of medical expenses for a dependent, but she
didn't have a spouse or any children. Turns out the "dependent" was her
dog. Her accountant set her straight that if it's covered in fur, you
can't claim it as a dependent. In general, pet expenses are not
deductable, but there are a couple surprising exceptions.
For instance, you can deduct expenses related to a foster animal if the goods or services are solely for the foster pet and
if the organization is a registered non-profit. That means it has
501(c)(3) tax status. Also, expenses exceeding $250 may require a letter
from the organization. In a landmark tax court case, a California woman
was able to deduct 90 percent of the $12,000 in deductions she claimed
for the 70 cats she fostered. Seventy cats. But this wasn't your average
crazy cat lady -- she was working with a legitimate charity.
Another
case in which you can deduct dog expenses? If you own your own business
and your dog doubles as a security system. But don't push it: You can't
deduct expenses for your Chihuahua. If you're going to claim you employ
Fido as a guard dog, you need to be a little bit afraid of him yourself
-- we're talking pit bulls and German Shepherds, not a Labrador who
greets you at the door with a squeaky toy. You can't deduct the cost of
the dog itself, but related expenses -- like food and medical bills --
can qualify. The craziest detail? You can depreciate your guard dog over
its lifespan as determined by a local breeder. Remember, as with
everything tax-related, documentation and receipts are crucial.
Some
people want to get paid for love, and sometimes they actually can. You
know that loaf of a boyfriend or girlfriend? They could add value come
tax time. To claim a nonrelative as a dependent, he or she had to live
in your home for the full tax year and make less than $3,800 in gross
income for 2012. You also generally must provide more than half of the
person's financial support, and he or she can't be claimed as a
dependent by anyone else.
There have been a couple of
completely ridiculous claims in this arena, like the man who tried to
deduct money spent on his mistress as a business expense. There is
another story about a man whose accountant asked him and his wife about
the mortgage interest deduction on their condo in Utah. The deduction
was legitimate but his wife didn't know about the condo, where he'd set
up his mistress. It may have been the last time they filed a joint
return.
We recently tied up awards season with the
Academy Awards, and one thing most movie stars have in common is that
they aren't hard to look at. A lot of aspiring actors and actresses are
tempted to write off plastic surgery, but just because you incur an
expense for business reasons doesn't mean it qualifies as a deduction.
Cosmetic
surgery is generally not deductible because it's for aesthetic reasons.
To qualify as a medical deduction, the procedure must be medically necessary,
meaning it was prescribed by a physician. So a nose job could qualify
if you are repairing a deviated septum. Remember, all your medical
expenses, including any allowable plastic surgeries, must come to more
than 7.5 percent of your adjusted gross income before you can claim
them.
To qualify as a business expense, you have to prove
the surgery is related to your job performance, and there is one
infamous case of plastic surgery satisfying this requirement. An exotic
dancer with the stage name "Chesty Love" had her breasts augmented to a
56FF and then a 56N. After the IRS ruled that her surgeries were
personal expenses, she appealed, citing her surge in income post
surgery.
Four years after she filed, a judge eventually
ruled that the implants could be deducted, comparing them to work
clothes and uniforms, which are allowable only if they satisfy a
two-step test:
1 - Required as a condition of employment
2 - Unsuitable for everyday use
Considering
Chesty Love's new assets weighed in at ten pounds apiece and she would
have taken them "off" after work if possible, they were considered
"props" that could, in fact, be deducted.
One final crazy
write-off: A young Amish man deducted his buggy. At first blush, this
seems to be a completely legitimate write-off -- it's for business
purposes. But the accountant looked closer and saw that the buggy had
been outfitted with a velvet interior, kick plates, dash lights,
speedometer, hydraulic brakes and dimmer switches. This Amish boy had
completely pimped his buggy, spending over $3,500 instead of the average
of about $2,700. The accountant ended up allowing him to deduct a
portion of the buggy, minus the tinted windows.
Friday, March 29, 2013
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