Did you hear the one about the ostrich? The sperm
donor? The dog food?
They're just three of the more ingenious tax deductions
that creative Americans have devised over the years
to counterpunch the tax collector. A quick Ali shuffle,
a feint with the left and an outlandish deduction delivered
with a straight face can take the sting out of the annual
tax beating -- at least until the Internal Revenue Service
Taxes, of course, are no laughing matter.
Serious consequences await those who fail to file, falsely
file, knowingly underreport or otherwise throw spitballs
at the system. Just ask Willie Nelson, who lost the
best little golf course in Texas to back taxes.
Still, every year Americans try to shave
what they owe on their personal income tax returns by
pushing the envelope and letting their certified public
accountant make the line calls.
"If you're going to be aggressive,
deductions are where you're going to do it. You're not
going to do it in the area of income; you want to report
all your income," says Frank Howard, CPA and principal
of Howard and Waltrip in Dallas. "I go ahead and
apply the smell test. Most of the time, they're just
throwing everything up against the wall to see if it
Old argument invalidated
As any accountant will tell you, the rewards of cheating
on your taxes are never worth the risk. And even if
you find a tax pro willing to push the limits, the Treasury
Department says when it comes to "potentially abusive"
tax moves, the old "my tax adviser said it was
OK" argument will no longer work.
"We are raising the stakes for taxpayers
who fail to disclose potentially abusive transactions
to the IRS," stated Treasury Assistant Secretary
for Tax Policy Pam Olson in announcing the tougher rule.
"Too many tax advisers have counseled clients against
disclosing their transactions with the expectation that
the advisers' opinions will allow the clients to avoid
By removing that argument, tax officials
now believe taxpayers' risk-to-reward calculations will
be more judicious, eliminating what Olson describes
as "inappropriate tax-avoidance transactions."
Still, it's a good bet that as the April
deadline approaches, many taxpayers will do -- or at
least try -- the darndest things. Here are nine of the
funniest, though not recommended, tax-trimming attempts
that clients have taken to CPAs across the country.
My son, my dog
Disc jockeys typically don't make much money and
save even less. A few years ago, one approached Wyoming
CPA Mike Lovelett for some free advice.
"I've got this problem, and I'm really
starting to get nervous about it," the DJ said.
"Several years ago, I was going to owe some tax,
so I put an extra deduction on my tax return."
Well, reasoned Lovelett, managing director
Skogen & Associates in Casper, it couldn't be
that bad. Then the DJ explained: "I put my dog
on as a dependent." The radio personality had deducted
his dog Red all these years, allowing him to escape
owing the IRS on those particular returns.
But, unfortunately for the DJ and all
other pet owners, claiming a dog or cat or any other
furry family member is definitely disallowed by the
Sex and the city
Then there was the client who approached Manhattan
CPA Marc Albaum about a very personal tax matter. "He
had made some money being a sperm donor and wanted to
know if he could take a depletion allowance," Albaum
recalls. "I told him he really needed to be an
oil well or something like that."
Updated: March 22, 2006