7.) VASTLY UNDERREPORT YOUR INCOME
Solution: For the next three years (the statute of limitations on an audit), it’s probably safest to live in a constant Orwellian state of suspicion. Assume there are no more friends, neighbors, even spouses in your life–only potential informants.
Obvious, yes, but so easy to forget you’re not the only one getting those W-2 and 1099 forms. Even in less transparent situations (business owners, freelance consultants, cash income from your home meth lab, etc.) the IRS has a pretty good idea of how much it costs to be you.
Solution: Make sure your web of lies is at least mildly feasible. It doesn’t matter how many coupons you clip, don’t try and tell the IRS you’re supporting a SoHo loft and yacht-of-the-month habit on $25k a year.
6.) TAKE SILLY DEDUCTIONS
Of course Gucci is deductible. Does the IRS really expect your clients to take you seriously in off-the-rack? That would be like trying to fix sinks without HBO! Look for these experiments in creative reasoning and more, coming soon to your Schedules A and C.
5.) MAKE UP CHILDREN
Solution: If you really think you deserve to deduct the flat-screen you use for FragFests/ “business meetings” on Xbox Live (MSFT), at least do your homework. Keep receipts, document personal vs. business use time, and generally treat each questionable write-off like a federal case. (Mainly because it could be.)
Despite the incessant neediness (Wait, food, shelter AND affection?), with up to $1000 in Child Tax Credit, who wouldn’t want kids these days? Luckily for some, there was a time when the IRS didn’t require social security numbers for dependents, allowing less scrupulous caretakers to write off children without them actually having to, um, exist.
Solution: Too bad this loophole was firmly closed in 1987, famously leading to seven million children claimed in 1986 magically disappearing forever. Whoops. Anyway, you can still make little tax write-offs the old fashioned way, with tools you may already have around the home.
4.) ROUND UP/DOWN
We get it—you care about the IRS. Why force them to add and subtract scary numbers like $23,967 of additional income and $763 in charitable deductions, when $23,000 and $1,000 crunch so much easier? Any extra coin you save is just a pleasant bonus. As much as the IRS appreciates the thought, those big, round zeroes stick out like sore thumbs. Really lazy, sloppy sore thumbs.
Solution: Fuzzy math is almost as bad as the crappy variety. If you’re going to use fake numbers, at least make them interesting. We’ve always been partial to 723. Or, how about 9,321? Oh, and 865,432.45? Also, a good one. (No, we don’t get out much. Why do you ask?)
3.) LAUNDER MONEY OVERSEAS
Even if you’re an Average Joe—i.e. not in a position to consider funneling money through your household staff in Bermuda or dealing with the headaches of a seven-figure Swiss Bank account—there are still plenty of people who want to help hide your money overseas. They usually advertise right between the penis enlargement pills and the deposed Nigerian princes.
Solution: Stay away from web scams–the bottom of the mattress is just as tax-free. Even for the uber-wealthy out there, remember that not only do tax shelters cost America an estimated $10 billion a year; they also let Uwe Boll keep making movies.
2.) HAVE A HOME OFFICE
So you’re self-employed–how much of your home is actually a sweet, deductible work area? Well, you do pace, like, everywhere. And, God knows you’re always thinking about work. Hell, might as well just write off the whole house, right? These fuzzy, poorly defined gray areas are like red flags to a bull, if that bull really enjoyed auditing things.
Solution: “Exclusive use” is the IRS buzz phrase of choice. Any portion of the home you deduct means that you should be ready to prove that working is all you do there. We’re not saying the IRS cares about your bi-daily twelve minutes of, um, personal Internet time, but better safe than sorry.
1.) FAKE PAPERWORK
So, you ignored our sage advice, and now the IRS is knocking down your door, demanding written proof of that $20,000 in goods and services you gave to African orphans last year. Nothing a six-pack of beer, your geeky nephew, and a copy of Photoshop (ADBE) can’t fix? Right? Maybe, but there’s no quicker admission of guilt (or faster route from civil suit to hard time) than trying to cover your tracks.
Solution: Don’t panic—an organization devoted to taking your money now must choose between exacting a financial penalty or shouldering your room and board for the next eight months—any thoughts on their first pick? Comply, smile wide, and hope for the best. It was good enough for Al Capone, right?