Ordinary and Necessary Expenses

Pushing It To The Limit: Odd, Unusual And Crazy Tax Deductions

Working at the IRS or representing clients before the IRS has its perks and advantages. Having the opportunity to observe all of the outlandish and bizarre attempts by taxpayers to assert legitimate,valid tax deductions is rare. On one hand, it certainly may involve the observance of a unique form of comedy. Here are some odd, crazy, unusual, and please note, unsuccessful tax deductions:

*Crazy Home Office Deductions
A woman that ran a home business tried to deduct what was basically her home refrigerator. She explained to her tax professional that she kept drinks in the refrigerator for customers and other business associates that came to the home office for meetings. According to the owner, this occurred four or five times a year while the refrigerator was in her kitchen and served her family.

Losses, Expenses and Interest between Related Taxpayers – Know The (Tax) Code: 26 U.S.C. §267

Congress, aware that related parties could create fictitious tax losses lacking economic substance based upon the related parties continued enjoyment of the property subject to the loss, enacted § 267 of the Internal Revenue Code to disallow certain losses and deductions on transactions between related taxpayers.

What You Need to Know About Deducting State and Local Taxes

Taxpayers that itemize deductions on Schedule A, (and file Form 1040) can deduct the cost of state income taxes on their federal tax return. The ability to deduct the full cost of these taxes  has its obvious advantages. Taxpayers may either claim such a deduction from state and local income taxes or state and local sales taxes, but not both. Basically, to be deductible, the tax must be imposed on a taxpayer and must have been paid during the particular tax year. Taxpayers that elect to deduct state and local general sales taxes, may use either their actual expenses or the optional sales tax tables.

IRS Audits – What Are My Chances?

IRS Audits – What Are My Chances?It’s considered by many taxpayers to be one of the most frightening events that could happen related to their everyday business affairs. What is this frightening event? An IRS audit, of course. But is a tax audit really that scary in real life? The numbers reveal that only 1% of all taxpayers experience an audit, and of this one percent, about one in five result in a meeting with the IRS.

Presently, the IRS audits half as many taxpayers as it did five years ago. However, the amount of tax recovered per audit has increased. The IRS uses an elaborate computer selection process, auditing only those returns which will almost certainly yield some adjustment.

Who qualifies as a real estate professional for tax purposes?

Issue

Who qualifies as a real estate professional for tax purposes? More specifically, how does a taxpayer establish that he or she materially participate in rental activities, so that the rentals become non-passive, and any losses can be used without limitation?

Related Tax Rules and/or Regulations

Internal Revenue Code Section 469

Facts

Escalante earned income from teaching and his ownership of rental properties that he managed himself. His teaching contract required him to work a minimum of six hours per scheduled work day. As is customary with this type of contract, it contemplated that there would be a substantial number of hours spent outside the classroom engaging in tasks and activities like lesson planning, grading papers, parent-teacher consultations, and faculty meetings.

Is there a business deduction for expenses incurred in marijuana related enterprises?

Issue

Is there a business deduction for expenses incurred in marijuana related enterprises?Is there a business deduction for expenses incurred in marijuana related enterprises?

Related Tax Rules or Regulations

Internal Revenue Code Section 61

Internal Revenue Code Section 280E

Prior to 1982, an illegal business was able to reduce its revenue by the cost of any product it sold (Cost of Goods Sold, or COGS), as well as other ordinary and necessary general and administrative (G&A) business expenses like rent, packaging, utilities, travel expenses, and even the cost of a small scale used to weigh the controlled substances sold by the taxpayer. In 1982, the IRS enacted Section 280E which dictated that businesses that trafficked in controlled substances, as defined by the Controlled Substance Act, could no longer deduct its expenses.

DEDUCTING TRAVEL EXPENSES RELATED TO YOUR JOB

Everyone at one time or another has wondered about deducting their work-related expenses from their income in order to pay lower taxes. Especially those expenses related to travel, whether these trips and excursions are to and from work or out-of-town. Federal law, specifically the Internal Revenue Code (“Tax Code”), allows individuals to deduct qualifying business expenses. What, if any, of a working taxpayer’s expenses related to travel are deductible as a business expense under the Tax Code?

IRS Fast Track Settlement Program

Yesterday, November 6, 2013, the IRS expanded nationwide, its streamlined Fast Track Settlement program (FTS), which aims to help small businesses and self-employed individuals under audit settle their differences with the IRS over their tax debts more quickly. The Fast Track Settlement program is designed to help small businesses and self-employed individuals who are under examination by the IRS.

The FTS program uses alternative dispute resolution techniques to help taxpayers save time and avoid a formal administrative appeal or lengthy litigation. As a result, your New York Tax Lawyer can resolve audit issues within 60 days, rather than months or years that it otherwise may take. Taxpayers nonetheless retain all of their rights to appeal even if they take advantage of the FTS program and they are not pleased with the outcome.

The Benefits of Hiring A New York City Tax Attorney

Facing taxation problems is not at all uncommon for the American population. It is not at all surprising, given the complexity of the economic system of the United States, which is a leading superpower in the whole world. Economic opportunities abound and one such opportunity is the availability of multiple jobs for its citizens. This, of course, is by itself good. Except that for many individuals, holding multiple jobs and thereby having a multiple source of income can get to be a headache when it comes to taxation. Some barely have enough time for fulfilling their work obligations, and it is such a real trouble when the IRS runs after them for unintentional tax miscalculations.

BUSINESS OR HOBBY? Will the IRS allow you to deduct losses?

At one time or the other, most of us get involved in one kind of venture or another, sort of trying your hand at something different.  Sometimes we make money in these ventures and the IRS can be counted on to expect its share of the profits.  But what if you lose money in the venture, will you be entitled to a deduction on your return for the loss?

 

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