When I was articling at an accounting firm, we used to work long hours during tax season. Most of those hours were dedicated to doing nothing but tax returns.
After a while I’d start to see the same types of returns – boring stuff like employment income, tuition credits, and RRSP contributions.
But once and a while there was always a tax return that made us all laugh.
Here are a few of the favorites that I can remember (all personal information has been left out, of course).
The ‘Personal Assistant’
One client had a thriving consulting business that he ran out of his home office.
The tax return for the home-based business was fairly straight forward – it had basic expenses telephone, office supplies and advertising.
After nearly completing the return I called the owner to give him an update. He seemed pleased with the progress so far but mentioned he had a significant expense that was not recorded – wages paid to a personal assistant in cash.
It seemed odd that he had an admin assistant he paid to help with his business but didn’t record the amounts paid to her.
I asked him what she did that was related to the consulting business. After all, I explained, it would make more sense to pay her legitimately since it would reduce the taxes he would have to pay.
He replied that she kept him company during the days and would give him the emotional support he needed to continue with his business.
It was difficult not to laugh, but I explained how expenses need to be related to the actual business, not just emotional support of the owner – and that the amounts paid to her couldn’t be deducted.
The Guard Dog
One man had a home-based business located in an area of town with a higher crime rate and break-ins would often occur.
The business was an autobody garage and the owner would fix up older cars on weekends for profits when he wasn’t working at his full-time job during the week.
The man was very talented at providing quality services and the garage sometimes had expensive vehicles in it. When someone wanted to customize their vehicle they would use his services to get the job done.
After looking at his business records it all looked straight forward – expenses like vehicle parts, autobody supplies and insurance.
He also had the cost of a guard dog on his books. When asked about this expense, he explained the dog was for the garage since the area was prone to break-ins. He had recorded the cost of food and vet bills for the dog as business expenses.
It turns out that the dog was a 4 year old wiener dog that stayed home during the week while the man was at his day job.
I’m not quite sure a potential burglar would be deterred by a wiener dog, so it wouldn’t qualify as a deductible expense!
The Yoga Retreat
I did the tax return for a woman who worked in investment banking. The industry required long hours and many of the projects she worked on had very tight deadlines.
The nature of the work was project-based but inconsistent in nature – sometimes it wasn’t very busy, but other times she was juggling multiple projects at once and they all needed to get done at the same time.
On top of that, she had a family at home with a husband who also worked full-time and two active boys.
Needless to say, the demands of her work and personal life led to a lot of stress.
One summer when things had slowed down at work, she decided she wanted to go on a yoga retreat to clear her mind and wind down.
But not just any yoga retreat – the one she went to was nearly two weeks and located in Costa Rica.
She took her family with her and they all had a great time.
When it came time to do her taxes, she submitted the receipts for the trip. They totaled over $10,000.
I asked her what the receipts related to and she explained it was for a yoga retreat – that she needed to do in order to keep her mind clear while at work and keep focused.
Again, I tried not to laugh while explaining that any work-related expenses need to be directly related to her work and that a yoga retreat she decided to take in Costa Rica (with her family in tow) wouldn’t qualify.
Conclusion: those are some of the funniest tax situations I have come across and they added some entertainment to the long hours during tax season.
Have you heard of any crazy tax deductions?
Related: Common Tax Myths
Related: The Ways We Overpay on Taxes