This is it: the final issue of Spidell’s 2024 Tax Season Tribune. Hopefully we have provided you with some levity during this filing season, and maybe a few new jokes to tell at parties. Don’t forget to follow us on LinkedIn, Facebook, and Instagram — you’ll get great information there, too.

We’ll continue to provide you with more analysis, seminars, and breaking tax news. Next Sunday, Spidell’s California Minute^® podcast returns for its ninth season, and Spidell’s Federal Tax Minute^® podcast will be back starting April 23.

The IRS is warning taxpayers of the inaccurate and misleading tax advice coming from social media, including TikTok among other sources. Before you roll your eyes at me, let me say up front that the IRS’s warning is less about Chinese disinformation and more about faux experts run amok.

Who would have thought that a group of people whose lives depend on “clicks” would provide anything but sound professional tax advice? To save you the time, I watched a TikTokker (wearing cut off jean shorts and a tank top) explain that all you have to do is start an LLC, and you can deduct all your cell phone, car, and other expenses against your other income — no actual business purposes needed. Why didn’t I think of that?!? Oh yeah, because it’s tax fraud, you dolt!

So, as I end my last Tribune article of this tax season, let’s raise a glass to TikTok tax influencers and artificial intelligence creators alike! They will give real professionals plenty of job security to last (… at least until I’m ready to retire).

Until next year!

In March 2023, the IRS issued new FAQs on their website addressing whether certain costs related to nutrition, wellness, and general health are classified as medical expenses under IRC §213.¹

The FAQs reminded individuals about the deductibility of expenses like smoking cessation programs, therapy, weight loss programs, and gym memberships.

However, it seems that people were taking the IRS’s advice too far because almost exactly a year later, the IRS issued an alert reminding taxpayers that personal expenses for general health and wellness are not considered medical expenses under the tax law.²

Specifically, general welfare expenses that are not specifically for the purpose of diagnosis, cure, mitigation, treatment, or prevention of disease are not deductible or reimbursable under health flexible spending arrangements, health savings accounts, health reimbursement arrangements, or medical savings accounts (FSAs, HSAs, HRAs, and MSAs).

The IRS noted that some companies were misrepresenting the circumstances under which food and wellness expenses can be paid or reimbursed under FSAs and other health spending plans. FSAs and other health spending plans that pay for, or reimburse, nonmedical expenses are not qualified plans. If the plan is not qualified, all payments made to taxpayers under the plan, even reimbursements for actual medical expenses, are includible in income.

We are excited to announce that in May, Spidell will begin to roll out a new look and feel for our brand! This includes a new logo and a fresh look for our marketing and subscription e-mails. But you can be sure that behind these visual upgrades, there will be the same high-quality tax analysis that you have come to trust and expect from Spidell.

Filing season can be hard on everyone, tax pros and taxpayers alike. But a recent poll by Cash App Taxes revealed that 25% of Gen Z taxpayers said they get so stressed during filing season, they need a therapist.¹ Further, 54% of that same group said that filing taxes has brought them to tears in past years or they expect it will this year.

This could open up a new advertising avenue for tax professionals: “No-More-Tears Tax Prep.”

(If Cash App Taxes sounds familiar to you, they were the ones involved in the logo dispute with H&R Block, which we covered in the March 5, 2023, issue of Spidell’s Tax Season Tribune.²)

AB 984 to the rescue

In an attempt to bolster the financial literacy of young people leaving high school, California’s AB 984 would require a one-semester course in economics that would include content in personal finance as a requirement to graduate.

According to the bill’s authors, “AB 984 guarantees access to a personal finance course to all high school students, instilling them with the skills and support they will need throughout their lives.” Problem solved.

Except the bill analysis admits that there have been numerous past attempts to mandate personal finance instruction in high school, but research into whether this instruction is actually effective has mixed results.³ Specifically:

“One author concludes that, ‘We have long noted with dismay that students who take a high school course in personal finance tend to do no better on our exam than those who do not. This finding has been a great disappointment to consumer educators and to those who support efforts to make courses in personal finance a requirement for high school graduation, and it points to the need for better materials and teacher training.’ (Mandell, 2006).”

Until personal finance finds its way into the curriculum, filing season might be a boon to therapists. And taxpayers will want to refer to the IRS’s FAQs to see whether those therapy costs are deductible medical expenses. But more on that next week.

You win some, you lose some. An Irish woman lost out on a payout worth more than $800,000 in U.S. dollars in an injury lawsuit after the judge dismissed her claim earlier this year because she won a tree-throwing competition just months after her supposed injury.

Kamila Grabska claimed that a 2017 car accident left her with pain in her back, neck, and spine, and she filed an insurance lawsuit in 2022 claiming she was unable to work for the previous five years.¹

In court proceedings in Limerick,² she was questioned about a photo published by a local newspaper the year after her injury that showed her heaving a Christmas tree through the air.³ Grabska said in court that she was only trying to “live a normal life.” Other evidence presented included video of her playing with a dog for up to an hour and a half.

Judge Carmel Stewart described the tree-throwing photo as “very graphic,” and dismissed Grabska’s lawsuit, saying “I’m afraid I cannot but conclude the claims were entirely exaggerated.”

As this tax season is winding down, here’s hoping you haven’t had to deal with a questionable return that may feel entirely exaggerated in its own way. After all, you can only trust a troublesome client as far as you can throw him, which is good news — unless, of course, you’re in Ireland and that client is a tree.

In a past Tribune issue, we covered the Banished Words List, which is released annually by Lake Superior State University in Sault Ste. Marie in the Upper Peninsula of Michigan. The 2024 list contains the following words:

• Hack
• Impact
• At the end of the day
• Rizz
• Slay
• Iconic
• Cringe-worthy
• Obsessed
• Side hustle
• Wait for it

You can read about the selection committee’s reasoning at www.lssu.edu/traditions/banishedwords/.

The Banished Words List is not the only fun tradition held by LSSU. In 1971, a faculty member started the Unicorn Hunters club. The club disbanded when he retired in 1987, but you can still get a unicorn hunting license through the university’s Department of Natural Unicorns.

The university also welcomes spring to the Upper Peninsula each year by burning a 10- to 12-foot paper snowman at high noon on the first day of spring.

U.S. Customs and Border Protection in Cincinnati recently seized a shipment containing 90 fake championship rings that, if they had been real, would have been worth $2.71 million.¹

The shipment contained 40 2019 Kansas City Chiefs Super Bowl rings, 20 1969 Kansas City Chiefs Super Bowl rings, 15 1985 Kansas City Royals rings, and 15 2022 Kansas Jayhawks championship rings. All of the pieces were made with cheap materials and faux gemstones, and bore the registered trademarks of the NFL, NCAA, and MLB.

The shipment appeared to be a person-to-person transaction, a common counterfeiting technique where the shipment is sent to one person who then mails out smaller prepackaged parcels to U.S. addresses, bypassing scrutiny.

The Cincinnati package was flagged for a physical search after an X-ray examination yielded inconclusive results.

Don’t forget about use tax

However, counterfeiters may not only land in trouble with Customs and Border Protection. In a recent tax appeal in California, a counterfeiter was also slapped with use tax on the street value of the fake goods he was holding.

The taxpayer was in the business of selling counterfeit handbags, belts, wallets, and sunglasses in Los Angeles.² The taxpayer sold two counterfeit items to an investigator, and based on those purchases, the California Department of Tax and Fee Administration (CDTFA) was able to determine the approximate markdown percentage of the counterfeit items as compared to what the items would have cost if they were legitimate. The two counterfeit items totaled $1,280, but the MSRP if they had not been counterfeit would have been $165,510. This resulted in a markdown percentage of 12,830.47%.

The CDTFA then applied the markdown percentage to the $13,059,470 MSRP of all of the confiscated goods. They determined that the taxpayer could have sold all of those goods for $100,998, and based the use tax owed on this amount.

The taxpayer was convicted of two counts of counterfeiting.³ Therefore, because he is a “convicted purchaser,” his purchases of counterfeit items for resale were subject to use tax because any purchase of counterfeit items he made prior to being convicted constitutes a taxable storage or use of those items.⁴

Before your blood starts to boil, I’m not talking about Communists, Republicans, or Buckeyes fans. This is something much more pervasive that affects all of us. Red dye #3.

If you’re old enough, you remember the disappearance of the original red M&M, which was discontinued in 1976 when the FDA removed red dye #2 from its safe list. We somehow survived red-M&M-less until 1987 when they returned using red dye #40 (except in Europe, where that dye is banned; this should probably be of some concern to us, but that’s a topic for another day).

However, red candies are again on the chopping block in California, following the passage of AB 418 in 2023,¹ which, beginning January 1, 2027, prohibits the sale of any food product containing any of the following: brominated vegetable oil, potassium bromate, propylparaben, and red dye #3.

Candies such as Skittles and Nerds contain red dye #3, as do pink and purple Peeps, certain chocolate milk products, and boxed cake mixes.² The Environmental Working Group’s Eat Well Guide returns a list of around 3,000 products containing the dye.³ M&Ms do not appear on the list; however, Mars didn’t use red dye #2 in its red M&Ms, either, but discontinued them anyway to avoid consumer confusion.

The future of the red M&M again hangs in the balance. And if it’s discontinued, maybe Mars will just replace it with more blue ones.

Thank you to everyone who sent in their tax jokes over the last several weeks. Here are a few final submissions from another Tribune reader, Tom K.:

Why did the accountant get into trouble at culinary school? He was cooking the books.

Why was the mullet being audited? Because he wasn’t up front with his business.

Why did the swimmer throw all his gear into the water? Because his accountant told him to pool all his resources.

We’ll wrap up our joke series on this April Fools’ Day Eve with a trip through the Tribune archives. Check out our 2021 article on a few tax-related pranks from years past.

It’s just a statue commemorating probably the most beloved Los Angeles Lakers basketball player ever, no big deal.

After the February unveiling of a new statue dedicated to Kobe Bryant at Crypto.com Arena, someone finally took the time to read the various inscriptions on the base of the statue. It probably would have been easier to mark any edits using a program like Microsoft Word than applying red pen to polished granite, but the Lakers have announced they’re working on correcting the following:¹

• Former NBA players José Calderón and Von Wafer’s names are misspelled Jose Calderson and Vom Wafer; and
• The phrase “DNP – Coach’s Decicion” appears directly under the correctly spelled “DNP – Coach’s Decision.”

It’s supposed to be like that

Another [less costly] option would be to claim that the errors were made on purpose. The 2017 unveiling of a statue on the USC campus included verses from Hamlet and the playwright’s name: Shakespear.

When pressed on the missing final e, the university said they did it on purpose, citing the various spellings of the Bard’s name throughout the centuries, for example Shakspeare, Shakspere, Shaksper, Shackspeare, and Shagspere. They had chosen an older spelling on purpose, even though it was less common. (Sure [wink].)²

At first, Marlene Engelhorn just had “family money”; you, know, the kind you have when you’re a descendant of Friedrich Engelhorn, the man who started the German chemical company BASF. But when her grandmother passed away in 2022, she inherited €25 million.

Prior to the inheritance, she had already founded TaxMeNow, an initiative of wealthy people actively working for tax justice in Germany, Austria, and Switzerland. Frustrated that her inheritance wasn’t taxed (Austria eliminated its inheritance tax in 2008), she has chosen to give away the €25 million. A team of 50 individuals will decide what to do with the funds. The group was chosen through a statistical process to be representative of the overall Austrian population.

Engelhorn noted, “I’m just one brain, I’m just one person and so to me, this is a huge relief knowing that the process of redistribution is much more legitimate and thorough and democratic than I could ever do it. Nobody needs another foundation.”

Here are a few more bad tax jokes for this week. The first comes from a reader who remembers hearing it from former Spidell speaker Steve Honeyman at a seminar years ago.

Two IRS agents are looking up at a flagpole, trying to figure how tall it is. Just then, two accountants are walking by and see the agents wondering how to measure the flagpole. The accountants walk up to the flagpole, take it out of the ground, and lay it on the ground. They measure the pole. They walk over to the IRS agents and say, "It’s 46 and 1/2 feet." Then the accountants walk away.

At this point one IRS agent says to the other, “Isn’t that just like an accountant? They told us how long it was and not how tall it was."

Did you hear about the CPA from Dallas who took on 100 new clients this year? He’s deep in the heart of taxes.

Did you notice that when you put the words “the” and “IRS” together, it spells “theirs”?

Growing up in the Chicago area, I’ve always had fond memories of St. Patrick’s Day … and not all of them relate to the thousands of Irish bars that can be found in the Chicago area.

I remember working in an office that was located on the Chicago River and watching as the city “dyed” the river green for the day. However, to be honest, some years it was hard to tell the pre- and post-dye river apart. 

I also recall watching Jane Byrne, the city’s first female mayor, wearing a long green fur coat for the St. Patrick’s Day parade. Although I must confess when I did a Google search to try to find a picture of the coat, all that came up were stories about how she moved into Cabrini Green (one of Chicago’s infamous housing projects) as a way to improve public safety and investment in the area. The woman had chutzpah … but I digress.

But enough about my memories.  Here are some fun facts about St. Patrick’s Day:¹

• St. Patrick wasn’t Irish (it is said he hailed from Wales or Scotland), although that doesn’t stop Ireland from declaring it a national holiday. Nor was St. Patrick’s name Patrick (he was born Maewyn Succat) and despite the stories, he didn’t banish snakes from Ireland as Ireland didn’t have snakes;
• 13 million pints of Guiness are consumed on March 17 across the world; and
• Two million people attend New York City’s St. Patrick’s Day parade.

And what’s St. Patrick’s Day without a few Irish jokes (the clean ones)?²

• How come you can never borrow a few quid from a leprechaun? Because they’re always a little short!
• What does an Irishman get after eating a load of Italian food? Gaelic breath.
• How come Irish golfers can’t finish their game on St. Patrick’s Day? Because they refuse to leave the green!

And lastly, one of my favorite Irish sayings:

“May your day be touched by a bit of Irish luck, brightened by a song in your heart and warmed by the smile of the people you love.”

It’s the dawn of artificial intelligence (or A.I. for short) and the beginning of the end of actual intelligence. Every industry is experimenting with and developing A.I. tools, but who’s to blame when A.I. screws up?

Recently, Air Canada tried arguing in a court of law that they weren’t liable for their customer service A.I. chatbot giving a customer incorrect information regarding its bereavement travel policies. Thankfully the court didn’t let Air Canada escape liability for its own creation.

But have no fear, there is sure to be endless creative legal arguments in this decade and the next as businesses try to automate and argue that it’s not their fault when their monster fails to deliver as promised. At the very least, it should provide some good reading (for those of us who still can).

How many of us have lamented the lack of decent help and the rise of the growing social media “influencer” army. An entire generation full of people sprinting into stupidity as fast as they can. Well, it won’t be long until skilled work is entirely automated. I am afraid that Mike Judge’s Idiocracy will become a reality, and much faster than the 500 years he predicted it would take.

Remember April 15? It has gone the way of the 8-track, the VCR, the payphone, the McDLT, cursive, the horse as transportation, long-distance calling charges, bloodletting, smoking in a hospital … the list goes on.

Since winter storm disaster declarations are the new norm, it’s interesting to note that the last true April 15 filing deadline for many taxpayers, including nearly everyone in California, was the 2019 filing season (for 2018 returns).

We can feel the breeze from the collective sigh of relief emanating from our readers each time the deadline is postponed. Can Congress just get their act together and either stick to their promise of simplifying the tax code or push out the filing deadline by a month permanently? One can only dream.

How many accountants does it take to change a lightbulb? As many as it took last year.

Your tax jokes are better than ours, so please keep them coming! Reply to this e-mail to send us your favorites, and we’ll include them in a future Tribune issue.

I keep a four-panel cartoon pinned in my office with Snoopy sitting atop his doghouse at his typewriter telling the IRS that he’d like to cancel his subscription and to please remove his name from their mailing list.

While funny, merely asking to be removed from the IRS’s mailing list won’t work to get the IRS off your back. But, according to the Treasury Inspector General for Tax Administration,¹ 77,868 living taxpayers found the ultimate loophole: They found their way onto the IRS’s list of dead people. Well, that’s one way to get the IRS off your back.

This year, I’m celebrating the 25th anniversary of my first tax season in this industry. After 25 years, if I manage to find my way onto the IRS’s dead people list, I might just quietly retire to a log cabin on a trout stream as far away from a cell tower as I can get. If that proves too cold for this Southern California native, then a deserted tropical island is my fallback plan.

I wonder if helping clients “accidentally” get on the IRS’s dead list could be a new revenue stream for my practice. It can’t be too much different than advising clients on how to become California nonresidents, right?

In case you couldn’t make it to the CDTFA’s first public auction featuring property seized during cannabis enforcement actions  (see “Make sure to set a repeated reminder about this upcoming event” in the February 11, 2024, issue of Tribune), here’s an update.

The good news for the CDTFA is that everything was sold – success! This included items like televisions, money-counting machines, paper shredders, and a snow cone machine.  All proceeds will be applied to the $14.4+ million in unpaid taxes from 10 Los Angeles-based cannabis operations.

The bad news is that the auction yielded a stupefying $2,075 (there are no missing digits between the dollar sign and the 2). What?! That means each of the cannabis operations gets a credit of only about $200.

Overall result: $14.4+ million in unpaid taxes.

In a dramatic reversal, Guinness World Records has updated its policy regarding matchsticks, which resulted in a new record-holder in the category “tallest matchstick sculpture.”¹

The policy change came after Richard Plaud unveiled his 23.5-foot tall 1:45 scale model of the Eiffel Tower, which was built using over 700,000 matchsticks and validated by a surveying firm. Unfortunately, Guinness rejected the model when it discovered that Plaud had not used standard matchsticks like the ones purchased in a store. Instead, Plaud had contracted directly with a matchstick company to purchase matchsticks in bulk … without the flammable tip. Because his matchsticks didn’t contain the usual sulfur blob, they were ruled to be too different, and the model was disqualified.

However, days later, Guinness announced that it had “corrected some inconsistencies within our rules which now allow the matchsticks to be snipped and shaped as the modeller sees fit.”

Plaud’s Eiffel Tower was awarded the new record, ousting Toufic Daher of Lebanon, whose 6-million-match scale replica of the Eiffel Tower in Beirut stands around 21.4 feet.

Do you know why Sherlock Holmes never had to pay income taxes? Brilliant deductions!

Your tax jokes are better than ours, so please keep them coming! Reply to this e-mail to send us your favorites and we’ll include them in a future Tribune issue.

Last year, we covered the case of the Harmon brothers,¹ whose darknet crypto mixing business was shut down for money laundering. The IRS had seized various assets, including a cryptocurrency storage device that the IRS was not able to crack the password for.

However, one of the brothers was able to recover $4.9 million in bitcoin (now worth over $20 million) from that cryptocurrency account because he knew the password, which allowed him to transfer the cryptocurrency from the seized account to his own wallet. Naturally, one of the first things he did (after further laundering the recovered bitcoins) was visit a nightclub, fill a bathtub with cash, and take a bunch of selfies.

Update: He was sentenced to four years for stealing over 712 bitcoins that were the proceeds of the darknet bitcoin mixer and subject to forfeiture in the then-pending criminal case against his brother.²

Mix master

Crypto mixing, or crypto tumbling, mixes potentially identifiable or "tainted" cryptocurrency funds with others to hide the fund’s original source.³ Funds from multiple sources are pooled together for a random period of time, and then they are redistributed at random times, making it difficult to trace the cryptocurrency’s source.

Mixing helps protect and maintain the privacy of using cryptocurrency. But due to its involvement in illegal activities, and because mixing services have been known to steal coins during the mixing process, many have suggested that mixing services be criminalized.

Last year, a McDonald’s franchisee in Louisville got busted for violating federal labor laws after the Labor Department discovered that two ten-year-old children were employed, who sometimes worked as late as 2 a.m. and who were not paid.¹

After digging deeper, it turned out the two ten-year-olds had come to work with their parent, who was one of the night managers. However, management had not approved the children to be in the employee parts of the restaurant where the deep fryers, grills, and ovens are.

Not-so-happy meal

A child operating the deep fryer may explain another McD’s mishap. A McDonald’s in Florida was sued for serving excessively hot food, but this time instead of coffee, it was a 200-degree chicken McNugget.² The McNugget was part of a happy meal order that landed in the lap of a four-year-old, who dropped the McNugget onto her bare leg, where it left a second-degree burn. The family was awarded $800,000.

The infamous “hot coffee case” involved 79-year-old Stella May Liebeck, who spilled an entire cup of McDonald’s coffee into her lap, resulting in third-degree burns. To cover medical expenses and lost wages for her daughter (who cared for her during her initial three-week recovery from the skin grafting process), Liebeck sought to settle for $20,000. McDonald’s refused, and offered $800. When Liebeck sued, a jury awarded her $200,000 in compensatory damages and $2.7 million in punitive damages. A judge reduced these amounts to $160,000 and $480,000, respectively, and both parties appealed, settling out of court for an undisclosed amount.