Nobody wants to cross the IRS -- if they can put infamous gangsters and Wesley Snipes behind bars, they won't hesitate to steamroll your sorry ass. Most of us fill out our forms and pray that a math error won't result in a black van showing up at our house and peppering it with machine gun fire.
But the truth is that the IRS isn't nearly as hardass as people think. There is a huge range of things you're allowed to write off from your taxes if you can make some kind of argument. And some of them are truly insane. Like ...
In 2005, Justin Rohrs and his truck slid off an embankment. If that didn't already ruin his day, it got worse after the police came and found that Rohrs was legally drunk and slapped him with a DUI. When Rohrs attempted the rather ballsy act of filing an insurance claim for $33,629, his insurance company predictably denied it. Because screw that guy. So far, society seems to be handling the situation perfectly.
Undaunted, Rohrs then attempted to deduct the loss of the vehicle from his taxes. The presumably stunned IRS turned him down ... at first. But Rohrs brought the case to the U.S. Tax Court to try to force the issue. He deserved a casualty loss deduction for his damaged truck, drunkenness be damned! And ... the judge agreed. He got to take the deduction.
"Your truck was clearly needed for business purposes."
How in the shit is this possible?
Well, according to tax law, deducting the costs of car accidents is a valid casualty loss deduction, so long as the accident was not caused by your own willful negligence or actions. And somehow, according to the courts, Rohrs did not act with negligence.
"I swear, at no point did I consume more than two light beers and one shot of vodka per hour."
You see, on the night of the crash, Rohrs was planning to go to a party at his friend's house. Knowing he'd be drinking, he made plans to get there and get back without driving himself. The problem is, after the party, Rohrs made it home, but then decided to drunk drive over to his parents' house. The judge deemed that Rohrs acted responsibly, applauding the fact that he had enough foresight to arrange a ride home after the party. Sure, he drove drunk, but he could have drunk drove more.
It's like emptying your gun into a group of puppies and missing. Technically you've done nothing wrong.
The judge ruled that driving after drinking doesn't amount to willful negligence in itself, and that the level of intoxication and the quality of driving needed to be taken into account. Both of these were of a satisfactory level to the judge, so he ruled that Rohrs was allowed to deduct his accident as a casualty loss.
Now, before you go out and try this yourself, there was (as you can imagine) some outrage over the ruling. Finding a tax court that will do the same for you now is pretty damned unlikely, presumably unless you come across a judge who also happens to be drunk that day.
Reclusive cat enthusiast Jan Van Dusen enjoys the felines. In fact, she would go out of her way to capture random feral cats on the street and care for them in her home, to the point that she was caring for 70-plus cats at one time. After treating them for any injuries they had sustained, sometimes she would release them back into the wild. Other times (70 other times, to be precise), she wouldn't.
As one would imagine, caring for a large pride of stray animals racked up some serious costs. For her 2004 tax return, Van Dusen tried to write off $12,068 for all her cat "rescue" items like cat food, vet bills, paper towels and other supplies.
Pictured: Other supplies.
The IRS, not known for its compassion even toward humans, told the cat lady that these were personal expenses and couldn't be deducted. In response, Van Dusen sued the IRS. As a person who cared more about the feral cats than ... anything, Van Dusen was nearly bankrupt and couldn't afford a lawyer, so she went up against the IRS' deadly lawyer army alone.
Although she did bring 70 "surprise" witnesses.
Throughout the case, Van Dusen tried to establish her credibility by saying that her cat rescue obsession (although she put it less crazy than that) was outside work for her volunteer duties for Fix Our Ferals, an IRS-qualified nonprofit organization which, by the way, she had no formal affiliation with. However, she produced checks and receipts for many of her purchases, and she explained that her house was so dedicated to cat care that she never had people over.
We're guessing there may have been other factors for that.
Despite the IRS' constant comparisons of Van Dusen to a crazy cat lady, she actually managed to beat the IRS and got deductions for most of her claims. Her victory served as a precedent that can help numerous other animal shelter organizations, and help justify any other out of control hobbies people have.
Unethical and business-savvy capitalist William D. Zack ran several companies in the '70s and '80s that engaged in some shady practices. In 1984, Zack's company began doing business with Ford, and in order to get some fake invoices that would let him skim money from his own company undetected, he had to bribe some people there. And we're not talking a few hundred dollars -- the bribes totaled more than $180,000, paid with the company money he was skimming.
Zack was eventually caught and charged with defrauding the American government, so he was soon facing an IRS that was determined to get back the money he screwed them out of with the fake invoice scheme. If he made money, he owed taxes on it, even if the money was made illegally.
"Woah now, we just want in on this. Then you can shoot whoever you want."
Zack, however, filed a petition to the Tax Court, arguing that he should be permitted to write off the bribes he paid, and thus reduce his tax bill. You know, the bribes he paid to facilitate his fraud. He claimed the under-the-table payments as legal "operating losses."
And ... the court agreed. It wound up slashing his taxable income by a quarter.
The IRS is concerned with money, not breathtaking immorality. Would you really rather it were any other way?
The idea of deducting bribes, an illegal activity, might sound impossible and stupid. However, it is a fairly common practice among industrial nations, including the U.S. In fact, the United States is one of the more conservative nations when it comes to bribery deductions. In Germany, tax deductions for bribes are perfectly legal ... with the catch that when you file your return, you have to report who you paid the bribe to. Not many people take them up on it.
"Yes, myself and the president of Burundi will be filing jointly."
If there are two things we've learned from watching gambling movies like Casino, it's never play in a casino when Pesci or DeNiro runs it, and that the house always wins. Gambling never ends well for the vast majority of people who do it, and when they keep giving you free drinks, you should take that as a sign that they just want to take advantage of you. As a result, you would think that no one at any level of government would feel sorry for you for blowing your paycheck down at the track.
Although they use similar methods as casinos when you owe them money.
But in 2001, gambler Robert Mayo bet $131,760 on horse racing and collected $120,463 on his wagers. So he wound up in the hole. Naturally, on his tax returns for the year he listed $10,968 in expenses for travel to the racetracks, research and "handicapping information."
It seems like a ballsy move to challenge the IRS after you lost in Vegas, because the odds of beating the IRS are bigger than even Vegas would touch. However, a decade later, the court ruled with Mayo, saying that these were not gambling losses, but business expenses. This was a very important case, as it deemed on a federal level that being a professional gambler is an actual job.
That's the sound of a thousand people quitting their real jobs and quickly becoming professional homeless people.
But don't take this as a precedent that means your gambling is a sensible, risk-free venture. The "professional gamblers only" rule is determined on a case by case basis, to weed out those who feel the weekend bachelor party that ended with them putting up the house on a Knicks game works as a tax deduction. No, they need to know that you somehow are so good at gambling that you make most of your income from it. That's right; in order to get the deduction, you need to 1) gamble a lot and 2) win. You can't walk away now, dude! We can totally feel your luck is about to turn around!
The government is like that judgmental friend who suddenly approves when you win.