Trying to claim deceitful deductions could get you put in the doghouse

Given how much we spend on our family dog Simba, he’s like a dependent. Thank goodness he doesn’t have to go to college, although we did put him through training school.

All the food, grooming and veterinary expenses add up. As a country, we spend about $63 billion on our pets, according to the American Pet Products Association.

So as my husband and I prepare our taxes, the thought crossed our minds: Could we claim Simba?

Apparently we’re not alone. A survey by software maker Xero of 900 accounting partners found that pets are the most asked-about deduction topic.

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But nope, your bulldog Napoleon is not a dependent. In general, you can’t deduct expenses for your pooch. (There are a few exceptions, such as for service dogs.)

Of course, my husband and I were only joking. Yet some people do test the agency when it comes to deductions.

I asked members of the California Society of Certified Public Accountants to dish about the crazy deductions clients have tried to get past them.

Here are some of their stories:

“My favorite was seeing Victoria’s Secret listed as a vendor in the uniform expense account for one of my clients,” said Andrew M. Porter, a CPA practicing in Lafayette. “I could not resist asking what sorts of uniforms his employees wore that came from Victoria’s Secret. Needless to say, the client did not end up taking that deduction.”

Lawrence Pon, a CPA in Redwood City, dropped a shady client who wanted to cheat on his tax return.

“Her favorite expression was ‘How will they know?’ ” Pon said. “She didn’t let the facts get in the way of the conclusions she wanted. Another favorite expression of hers was ‘What can I get away with?’ ”

The client once chopped down a tree that was blocking her view. Unfortunately for her, the tree belonged to the city, and she was fined $45,000.

“She wanted to deduct this as a charitable contribution,” Pon said. “My office was so glad to get rid of her.”

Mitchell Freedman, a CPA in Westlake Village, said numerous clients ask him if they could put money in foreign bank accounts to avoid paying taxes. That would be a “no.”

Freedman said he has many clients in the performing and creative arts who ask if they can deduct every item of clothes that they purchase as a wardrobe expense.

That would also be a “no.”

Janet Lee Krochman, a Costa Mesa CPA, shared two “nightmare stories.”

Once Krochman was reviewing the prior year return of a potential new client and noticed some funky accounting going on. Cash from the client’s business (on a weekly or biweekly basis) was taken to the bank and turned into cashier’s checks, which were then put into a safe-deposit box.

The potential client was attempting to deduct expenses without reporting all of the business revenue. “When I asked the potential client if they were aware that they were cheating on their taxes, their answer was yes and that ‘everybody did it.’ ”

She did not take on the client.

Finally there was the daycare provider whose family appeared not to eat.

Krochman had a client whose personal returns she had been doing for years. She was asked to do the business tax return for the client’s new daycare center. The client was using an accounting program to keep track of revenue and expenses, and she trusted the figures.

But the return was audited and the auditor noticed something odd while reviewing the business and personal checking accounts.

“He asked, ‘Where is the family’s personal food purchases?’ ” Krochman recalled.

The client claimed his family only used cash to buy food and didn’t have receipts. But the food expenses for the daycare were very high. The auditor figured out that the client was funneling the personal expenses through the daycare business. The client ended up having to pay $30,000 in fees and penalties.

— Washington Post Writers Group

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