Favorite Urban Tax Legends

My clients, including those in Ventura County, Los Angeles County, Santa Barbara County and Orange County, are creative when explaining how they ended up with an IRS tax problem including unpaid income tax, unpaid payroll tax and unfiled tax returns. Here are some examples:

I don’t have to claim the cash I received, only the checks.

Putting it on the corporate credit card automatically makes it deductible.

It’s the accountant’s job to figure out how to write that off.

If I’m in a California probate, I won’t have to pay estate tax and income tax.

Filing late in the filing season near April 15 decreased your audit risk.

If you show you owe at least $1 instead of getting a refund, you are less likely to be audited.

The Amish don’t pay income tax.

There is a Slavery Reparation tax credit for African Americans who never received their ’40 acres and a mule’.

There are loopholes to benefit the rich which your tax professional doesn’t even know.

I only have to claim the income for which I received a 1099.

I can deduct the cost of keeping my dog as a security system.

I can avoid estate tax at death if I give away all of my property right before I die.

Because the IRS didn’t audit me, the deduction I have been taking all these years must be legal.

Filing an extension and filing near Oct 15 decreases your audit risk.

Taxpayers over age 65 who are still working don’t have to pay Social Security tax.

Taxing labor/services is unconstitutional.

Attorneys can deduct their cable bill because Court TV is educational.

AMT is only for high income taxpayers.

“Only the little people pay taxes.” – Leona Helmsley, Federal Inmate
The federal income tax is unconstitutional because the 16th Amendment was never properly ratified by the states.

The federal income tax is voluntary and applies only to those who volunteer to pay it.

You can incorporate your business in Nevada and pay no state income taxes, even though the corporation does business in your home state and other states.

Filing on extension and claiming a large refund increases your audit risk.

Life insurance proceeds are not taxable.

Nurses/police/EMTs on call can deduct the cost of their monthly phone bill since they need to have a phone to keep their job.

Firefighters can deduct the cost of their lunch since they are on duty 24 hours a shift.

Claiming an office in the home increases your audit risk.

S corp owners don’t have to claim a salary.

You can claim your live-n girlfriend as a dependent.

Someone has to win the Irish Lottery.

The Internet Tax Fairness Act forbids states from imposing sales or use taxes on goods ordered over the internet and shipped from outside the buyer’s state.

Newly arrived legal immigrants or refugees get a seven-year federal income tax holiday.

You can deduct the cost of your car and all its operating expenses (or mileage) as a business expense if you put advertising on the car.

You can deduct the cost of your vacation if you go on a job interview (keep that business card of the interviewer) while away.

Showing $495 as a non cash donation has less audit risk than showing $500.

Most IRS agents/officers are mean and hard to deal with.

I can deduct a gift of up to $12,000 given to my child.

Police officers can deduct $5 a day as Walking Around Money (WAM).

Criminals (i.e. drug dealers, etc.) are not required to pay taxes on their illegal business income.

If I don’t file my return, I don’t owe any tax.

Receiving a 1099 increases your audit risk.

Using the pre-printed IRS label increases your audit risk.

My tax at year end is determined by how I fill out my W-4.

If I go to one of those “pennies on the dollar” places, I will only owe them and the government “pennies on the dollar.”

I don’t pay taxes. I got a refund.

My return is easy, it’ll only take you about 5 minutes to do.

For help dealing with the IRS, call an experienced tax attorney. Call Mitchell A. Port at (310) 559-5259.