THE COLOR OF MONEY
Don't be a fool: the IRS takes tax deductions seriously

By Michelle Singletary

WASHINGTON — To mark April Fool's Day, I wanted to highlight some of the foolish people who try to slip the most outlandish tax deductions past the Internal Revenue Service.

William E. Philbrick, a certified public account and former IRS revenue agent, has seen quite a number of creative tax deductions.

Philbrick, now a senior vice president at Greenberg, Rosenblatt, Kull & Bitsoli PC in Massachusetts, remembers one elderly woman who tried to claim her deceased parents as dependents.

Philbrick said the woman took as too literal the IRS 1040 instructions for a qualifying dependent.

For you to claim a dependent on your tax return, five tests must be met:

• The person has to be related or have lived in your household all year.
• The person can't have filed a joint return (unless to claim a refund, and no tax liability would exist).
• The person must be a U.S. citizen or resident alien (or a resident of Canada or Mexico).
• The person's gross income can't be more than $3,050 (with some exceptions).
• You must have provided more than half of the person's total support.

Philbrick said the woman, using the dependency tests, reasoned that her dead parents hadn't filed a tax return, they weren't being claimed by anyone else, they were related to her and they didn't have any gross income. The woman even went so far as to produce a perpetual care contract and claimed, "I provided 100 percent of their support," Philbrick said.

"Obviously, she didn't apply common sense," joked Michelle Lamishaw, a spokeswoman for the IRS. "When filling out your tax return you don't want to turn it into an exercise in creative writing. That belongs in an English 101 class, not in the world of taxation."

You can deduct the cost and upkeep of work clothes if you must wear the clothing as a condition of employment and the items are not suitable for everyday wear, according to the IRS.

And don't try arguing that you don't wear your business suits or dresses outside of work. It's been tried and denied. Examples of workers who may be able to deduct the cost and upkeep of work clothes include firefighters, health care workers, law enforcement officers and letter carriers.

Under the category of "you have got to be kidding," here are a couple of deductions that were allowed:

• Michael B. Allmon, a CPA in Marina Del Rey, had a famous actress client in her early 20s who was able to legitimately deduct the costs of a personal trainer and health club expenses for the time it took her to lose weight. The studio told the actress she had to lose her womanly curves.
• Laura Ross of San Francisco said she once had a transgender client who, because of a doctor's prescription, could legitimately deduct electrolysis and the sexual reassignment surgery. Not all the electrolysis was deductible, however — just what was related to surgical areas. Getting rid of a beard didn't merit a tax deduction.

Just remember when it comes to your taxes, don't be foolish.

As Lamishaw said: "You don't want to have too much of a sense of humor when filling out your tax return, because the consequences are not at all funny."