No, your husband is not deductible ... and other IRS tales
Claiming the cat spa or ugly suit? Amazingly, the IRS sometimes says yes.
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One tool to avoid the guesswork is ItsDeductible, a database showing the deduction value of thousands of donated items - everything from bug zappers to pet-toothcare products.Skip to next paragraph
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The software also leaves space on its forms for people to write in their own estimates for the value of "custom items," says cofounder Carey Rademacher.
These have included an animal-warning device for a car bumper, a cat spa ("what that is, I don't know," Ms. Rademacher quips), a 100-gallon fish aquarium, and, yes, a husband. Citing privacy rules, Rademacher wouldn't tell what value the wife had assigned to him.
Writing off personal trips because everyone you meet is a potential client is a no-no. But if it's a true business trip, you don't necessarily need receipts.
One of Ms. Rosenberg's clients spent $50,000 in cash on business travel. Rosenberg came up with a different kind of paper trail: "He happens to send me postcards from every city ... so I could prove how many cities he'd been in. I could use TV guides and newspaper clippings to show what he's been up to, and the contracts show that he isn't being reimbursed for these things."
The precedent is the "Cohan Rule," named after vaudeville star George M. Cohan, who couldn't be expected to lug around records for the IRS in his trunk.
Every year the IRS warns people about the Dirty Dozen tax schemes. They range from hiding money in offshore accounts to claims that African-Americans are owed a refund for slavery reparations.
"Don't be fooled," said IRS Commissioner Mark Everson in a statement on the website last month. "There is no secret way to escape paying taxes."
In 2003, there were approximately 1,800 tax-fraud investigations, Rademacher says. Granted, that total represents a tiny percentage of the more than 200 million tax returns filed, but of the 770 people indicted, 80 percent went to jail for an average of 28 months.
Some stretches in deductive reasoning, however, result more from wishful thinking than from deliberate deceit.
With the proliferation of Internet tip sites, people read plenty of material about taxes. But "typically somebody will read the first sentence of a [tax] rule and get the rule half right," Cobb says.
He had to burst a lot of people's bubbles in December, when they called about glossy auto brochures proclaiming they could buy a sport-utility vehicle and deduct up to $100,000.
In reality, he told them, the deduction applies only to the value of vehicles over 6,000 pounds that are also used for business.
Cobb did once save someone on the verge of being deliberately duped.
Two men came into his office, one a bus driver who earned $50,000 a year, the other a member of what seemed to Cobb to be a "cult," though technically, it was a charity.
The latter was trying to convince the former that if he gave the group his salary, he wouldn't have to pay any taxes.
Cobb simply told them the facts - that charitable deductions were capped at 50 percent of the donor's income. "You could see the cult guy getting agitated, because he wanted me to validate what he was saying," he recalls.
But there are no limits to the charitableness of Cobb himself, who finishes the story this way: "You see all kinds. People are searching."