5 Tax Hacks That Are Just Straight-Up Fraud
It’s that time of year again, where the long arm of the law finds its way into our pockets and demands its fair share of this year’s earnings. Wherever your personal political beliefs lie on the spectrum of public funding, the actual moment where you get to watch some of your paychecks get hoovered up is never fun. Sure, there’s a chance for a refund — if you’re one of the people lucky enough to have landed one of the three dozen remaining W2 jobs left in America. But along with all that cool sexy freelancing comes a pretty stiff tax bill.
Those big numbers staring at you from the top of a tax software browser window naturally activate every crafty little synapse in the human brain, the same ones that kept us all from being eaten by saber-toothed tigers, to figure out a way to finesse things. Despite the general wisdom that the IRS is not an organization you particularly want to test, all sorts of armchair experts pop out of the woodwork with ways to pay less. Unsurprisingly, some common beliefs are less a brilliant twisting of the tax code and more a bet on the fact you won’t get audited.
Here are five tax “hacks” that are just good ol’ tax evasion…
Deducting Your Home Office
Especially with the large amount of people working from home post-pandemic, the tax hack du jour that I see repeated ad nauseam is to write off a portion of your rent used for your home office. It’s easy to see why it’s such a sexy proposition (or as sexy as any tax content can be). People hate paying rent, and they hate paying taxes. Who would pass up the opportunity to somehow pit them against each other?
The problem is, qualifying to write off your home office is a lot less common than we’re led to believe. First of all, you have to be self-employed. If you’re a W-2 employee, sorry, but the IRS is done with this line of questioning. Even if you’re self-employed, there is one little word that almost always gets glossed over in this situation: “exclusive.”
Directly from the IRS website, the caveat on this deduction is, “If you use part of your home exclusively and regularly for conducting business.” Exclusively meaning only for that purpose, ever. You might say, “Well, certainly they don’t mean it that literally.” Yes, they do. They’re the IRS. If you’ve ever used that space or that equipment for anything but pure, unadulterated work, you’re shit out of luck. If, come closing time, your home office and work PC become a temporary gaming enclave, for example, your home office deduction has just been eliminated. By the word of the law, if you do jigsaw puzzles in your home office on Sunday afternoons, you’ve just ruined your chance at a tax break.
Claiming Not-Quite Dependents
Claiming dependents and giving yourself head-of-household status is a quick way to slash a nice chunk off your tax bill. Unfortunately, slashing a nice chunk of your tax bill for less-than-sterling reasons is what is generally referred to as “tax evasion.” The language here begs the brain to start justifying a way to check this particular box, making you ask yourself questions like “What does it mean to DEPEND on someone?” Unfortunately, we’re talking tax code, not diary entries, so the IRS is pretty clear on this.
Common claims here seem to be divorced couples both fighting to claim dependents, or for the childless among us, trying to claim older parents as dependents. You also need to provide more than half of the monetary support for the person in question, and if it’s not a child, they need to have made less than $4,300 in income over the entire year. These are numbers that invite fudging given the potential tax break, but fudging in this case is a felony. Not only that, you can rain down a bevy of IRS interest on the person you claimed as well.
Writing Off Your Commute
The idea of “business expenses” is inherently attractive. You get some sweet-ass deductions, you get to feel like a big-time business boy or girl. Win-win, right? In reality, though, they’re not only mostly useless for a large portion of the population due to the existence of the standard deduction, but horrendously ticky-tacky. One thing that seems like an easy no-brainer, especially with gas prices spiking, is to write off commuting costs as a business expense. After all, how are you going to work if you can’t get there?
Unfortunately, this one isn’t that complicated. It’s pretty much just a hard no from the IRS. Commuting costs are not tax-deductible as a broad category, outside of very specific criteria that probably do not apply to you.
Not Paying Taxes on Cryptocurrency
Crypto is like, off-the-grid. It’s like, outside all known government. It’s the currency of freedom. It changes hands between two free thinkers, outside of the view of those fat cat bankers, hack the planet, etc.! I don’t have to pay taxes on it for the same reason it’s medium legal to buy ecstasy with it on the dark web.
Yeah, no. Despite your hopes that crypto bros managed to create a form of currency so deeply obnoxious that the IRS wouldn’t take an interest, they’re extremely aware of crypto and any exchanges thereof. Between its manufactured cool factor and the tendency of crypto evangelists to naturally believe they’re on a higher plane of thinking than everyone else on earth, some might convince themselves they’ve ascended beyond trackable income. That air of mystique may fade a little when they realize even basic TurboTax software is well-equipped to deal with crypto nowadays. Whether you sold it for cash, exchanged it for goods or exchanged one coin for another, it all needs to be reported.
Not Paying Taxes on Things You Stole
Smash-and-grab artists, bank robbers, cat burglars and jewel thieves, don’t think that just because your occupation is frowned upon that the IRS doesn’t consider it income. The fair value of stolen property needs to be reported as income on your taxes.