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A whole new audit selection criteria?

By Sandy Weiner, J.D.

Contributing Editor

There has been a lot of debate in recent years about the IRS’s audit selection methods. Some people claim that the IRS unfairly targets poor people over wealthy people, and we all have read the recent reports about the IRS targeting various political figures. Now it seems that a new criterion could come into play: companies whose CEOs prefer risky sports hobbies.

As it turns out, a study published by the American Accounting Association that was conducted by four highly reputable universities has concluded that CEOs who prefer risky sports hobbies are more likely to take a risky approach to their company’s tax planning.1

So why should the IRS bother with reading a corporation’s Schedule UTP, Uncertain Tax Position Statement, when it may be just as easy to uncover a corporation’s overly aggressive tax positions by asking whether the CEO likes sky diving? Car racing? Bull riding?

Have a CEO who simply likes to play croquet, bridge, or miniature golf?  Don’t even bother auditing them, they’d never cheat.

But why should only CEOs who like risky sports be targeted?

What about people who:

  • Order sushi in the desert?
  • Wear plaids and stripes together?
  • Eat strange foods … think jellied moose nose (a Canadian delicacy), fried tarantulas (a Cambodian specialty), or the Italian casu martzu (I’m not even going to describe this one
  • Drive solo in the diamond lane? or
  • Regularly contradict their in-laws?

I mean, even if the audit selection success rate isn’t quite as accurate, it sure would be far more interesting for tax pros and auditors alike to review the new Schedule ULC, Uncertain Life Choices.

TGIF Mozzarella sticks bag

1 Cohen, Michael, “CEOs who take risks with sports may do the same with taxes,” Accounting Today, May 11, 2022

Busy season: good for the bottom line, bad for the waistline

By Kathryn Zdan, EA

Editorial Director

According to ezCater, a corporate catering platform, healthy eating goes right out the window as soon as tax season hits.1 They surveyed 600 tax pros to see how busy season affects their diet and found:

  • 96% reported skipping meals they would have normally eaten;
  • 81% said they don’t eat as healthy during tax season as they usually do; and
  • Gen X tax pros (born between 1965 and 1980) were 86% more likely than Gen Z (born 1997 to 2013) to indulge in comfort food during busy season.

But it’s not all bad news. Office-provided meals can offer a way to take a quick break and recharge before heading back for that 6:00 to midnight shift:

  • 82% of those surveyed say meals provided by the office allowed them to take a break from their work;
  • 75% noted being able to interact with other employees;
  • 72% said office meals allowed them to be able to work extra hours.

Maybe you can have your cake and eat it, too

So a huge order of McDonald’s for the entire office is probably off the table, right? Not so fast. Dinner in the conference room might not have to always be green goddess salads and lettuce wraps.

McDonald’s has partnered with Beyond Meat and began selling the McPlant burger in 2021, which is currently available in Texas and Northern California.2 (The burger is permanently on the menu in several countries in Europe.) McDonald’s also just announced the rollout of their next plant-based product: McPlant Nuggets, which are made from peas, corn, and wheat, enrobed in a tempura batter.3 No pink foam in sight.

Chick-fil-A is also expanding its menu to offer plant-based options: After four years of R&E, starting February 13 it released a breaded cauliflower sandwich that is currently available at locations in Denver, Colorado; Charleston, South Carolina; and Greensboro, North Carolina.4

The Tax Man Cometh for Danny Trejo

Actor Danny Trejo (Machete, Con Air) is filing for bankruptcy in order to reorganize his assets and resolve a $2 million tax debt.1 The actor also owns Trejo’s Tacos in Los Angeles and Trejo’s Donuts in Las Vegas.

Mr. Trejo hopes the move will mean he’s debt-free by 2024. He reportedly said the debt resulted from “mistakenly” claiming certain deductions for years and pointed out that he now knows that “dog grooming is not a legit expense.” At least, not for a donut shop.

Interestingly, last year, Mr. Trejo appeared in an episode of the YouTube accounting mockumentary “PBC.” The episode was titled “Trejo’s Taxes” and featured the actor menacing clients into taking deductions they were not entitled to.

You can watch the clip here (contains some offensive language… it is Danny Trejo, after all):

A few fun facts about this week’s writers:

Sandy Weiner, J.D.

Sandy Weiner, J.D., as California editor, loves all things California. Whether it's hiking at Big Sur or playing at the beach in San Diego where she lives, Sandy takes full advantage of all that California has to offer as a way to clear her head after trying to comprehend and explain California's Revenue & Taxation Code.

Kathryn Zdan, EA

Kathryn Zdan, EA, spends her non-Spidell hours on photography and watching horror films (and then sleeping with the light on). She also enjoys hiking, biking, and watching foreign films.

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