Outrageous attempted tax deductions make for a good laugh, but as frivolous as they seem, in reality, some are not quite so far off base. For example, a horse farm that is properly set-up and used for income producing activity can be deducted. However, a horse farm used purely for one’s own personal entertainment (a hobby) is not deductible. Additionally, many deductions such as vacations, pets, food, and clothing may, or may not, be acceptable tax deductions, based upon the taxpayer’s specific industry of employment and method of reporting (individual, LLC, SCorp, LLP, etc.).
Misrepresentation or erroneous reporting of tax deductions can quickly lead to an IRS audit. A key component that the IRS will look at if an audit is triggered is the separation of business and personal expenses. Keeping thorough, organized, and accurate records is essential for a taxpayer to protect him or herself from additional and unnecessary tax expenditures.
About Five Stone Tax Advisers
Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome. Our Tax Preparation and Planning unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact to ensure you stay compliant and pay less taxes.