Every year people both do their own tax returns or pay companies like
H&R block to do it for them. If you're willing to do some homework at
your home computer, you can probably do better than H&R block.
Here is the web site for the US Tax Court:
Note that near the top of the page there's an "Opinions Search" link.
When you click on that link, you get a search engine that allows you to
type in times and text for the search engine to look for.
For example, I typed **
/14 in the date range to search all tax court
cases in 2014. (The asterisk is a wildcard character that can mean any
number or letter, so the computer would search all cases in 2014.)
And I typed in "home office" into the text window so the computer would
search for court cases where that character string appears.
And, for 2014, I got 11 hits, including one where a Dellward Jackson
owned a motor home and used it to sell insurance policies at RV
conventions and RV shows. The RV was therefore a home office, but none
of the costs associated with it were deductable because none of it was
used EXCLUSIVELY for business purposes. Or at least that's what I
understood, not being familiar with American tax law.
Still, by reading the judge's decisions in cases like this, you learn
exactly what rules apply to expenses that fall into those grey areas
that the black letter of the law had never really anticipated.
If you find only one tax court case that deals with something you wanted
to know about, it will be a wealth of information because it will tell
you the precedent setting case that established the current
interpretation of the law, and you can find that case by searching for
it with the search engine so that you can read it and know all the
details of that case and why the judge ruled the way he did.
Your IRS will have it's own lawyers, and they will be up to speed with
what the IRS consider "allowable" and what the courts have judged to be
allowable, and there's often considerable difference between the two.
Any tax court judge you stand before will also be up to speed on what
the IRS rules are, and what Tax Court Judges have allowed in those
precedent setting cases. If you have a tax court case to back up your
arguement, you'll win every time because the judges and lawyers know
that what the IRS says isn't always what the courts have held to be the
proper interpretation of the law.
Also, if you really don't want to go through all this, but you're being
audited by the IRS, probably the best thing you can do is co-operate
with them, open your books wide open, give them all the actual numbers
and pay what they determine you owe. That's because they have enough
idiots that burn all their records to make a proper assessment
impossible, and so the IRS has to go to court in those cases and that
means paying the lawyers salary to put togeter a case against you and
present it in court. If you save them that trouble and expense, they'll
go easy on you. That's because they KNOW lots of people cheat on their
taxes, and they're just doing their job catching them. They want people
to just fess up so the machinery operates smoothly as opposed to doing
something stupid like burning all your tax records and forcing them to
spean a bunch of money on lawyers salaries to prosecute you.
The Tax Court of Canada has a similar web site with a similar searh
engine, as does the Appeal Court of Canada and the Supreme Court of
Canada, but the Appeal and Supreme courts hear all cases, not just tax
One good example applies to myself. I once got audited and the CRA
agent assessed 75 percent of the fair market rent of the apartment I was
living in as a "benefit to me" from my company, and added $600 per month
for 12 months to my income. I searched the tax cases and I found a case
where a caretaker in Alberta had been assessed only 25% of the fair
market value of his apartment because he had to answer phone calls from
early in the morning to very late at night and when he was in the bath
or on the toilet, had once been assaulted by youths loitering in his
building, and used part of his own apartment for storage of his company
records and keys. Well, all of those same facts applied to me, and MOST
of my apartment was used as company storage space. I presented my case,
and the CRA assessed that I was receiving a benefit from my company of
10 percent of the fair market value of the rent on that size of
apartment. I went from 75% of $800 per month to 10% by just referring
to that one court case, and showing how my situation was even worse than
that of the caretaker in Alberta.
PS: If you get audited in Canada, they audit you for 3 years. If you
don't fess up and decide to give them false records for those three
years instead, they'll go back another 3 years. Potentially they can go
back forever, but generally they'll stop at 6 years no matter what you
do. If you get audited, and pay what you owe, that's the end of it.
You are no more likely to be audited again than anyone else in the
general population. It's not like they pay any MORE attention to the
tax returns of people who've been caught cheating in the past. There's
just too many of those people to do that. And, it wouldn't be fair.
The IRS or CRA could keep just as busy auditing the same people every
over and over, and that would be unfair to those people. So, they audit
you for 3 years, you pay them for three years, and you both walk away
forgetting about those 3 years. The next tax return you submit is no
more likely to be audited than anyone else's. I expect the rules in the
USA would be similar to that in Canada but I don't know for sure. If
you read some tax cases, you're bound to come across people that "made
up" their tax returns with numbers they pulled out of their A$$, and you
can just read about what happened to them. Also, it's considered poor
form to phone any of the people who's tax cases you read to ask them
questions. The tax cases will give you a guys name, where he lives and
all that stuff, and you can get his phone number from the phone company
of the city he lives in, but it's scary if you phone him because he's
gonna be paranoid. Regardless of what you say, he's going to think
you're the IRS trying to check up on him. So don't do that unless it's
something that's not going to make him paranoid.