Forewarned is forearmed.
A year ago, we devoted a three-part series to warning flags for possible IRS audits.
But it’s tax season again, and therefore a good time to revisit the tactics that can help prevent tax audits.
In our March 29 post last year, we noted that taking unusual tax deductions can raise your risk of an audit. In that post, we used the example of a professional bodybuilder who tried to claim a business expense deduction for the body oil that he said made his body glisten with sweat while competing.
The thing is, however, that the bodybuilder prevailed in his contention that his posing-oil deduction was legitimate. He took his case all the way to the U.S. Tax Court and won.
Our point is that it is natural to be wary of the IRS’s response to a deduction that may seem out of line. But this does not mean you should be intimidated either.
So what are some examples of deductions that are genuinely outlandish? Money Magazine recently offered a few.
One of these was taking a deduction for the installation of air conditioning to address a disorder involving excessive sweating. Another was surgery on a nose for someone who worked as a wine taster.
When you think about these two examples, they almost seem like New Yorker cartoons. They should be seen as cautionary tales, not as dire warnings not to go too far in taking legitimate advantage of various provisions in the tax code.
After all, taking a tax deduction for a pet’s medical bills also sounds like a New Yorker cartoon. But that deduction was allowed.
It therefore makes sense to talk with a tax attorney if you are in doubt about what to claim – or if you have been audited by the IRS for what you did.
Source: CNN Money, "10 tax audit red flags: You claim bizarre deductions," Blake Ellis, March 14, 2014