In 2009, we represented an individual who was criminally charged by the IRS for fraudulent tax returns. Although we achieved a great result for the client, his attempt to deduct his wife’s breast enlargement surgery was rejected by the U.S. Tax Court.
It turns out, however, that removal of one’s penis is tax deductible. Why the difference?
In a recent breast enlargement case, the IRS had disallowed $21,741 in medical expenses incurred for hormone therapy, removal of the taxpayer’s penis (“sex reassignment” surgery) and breast augmentation. After a full trial, the U.S. Tax Court decided that a sex change could be medically necessary if the taxpayer suffers from Gender Identity Disorder (GID). Because the hormone therapy had already produced some apparent enlargement of the taxpayer’s breasts, however, the court ruled that the expenses related to the breast enlargement procedure were cosmetic and therefore not deductible.
The IRS unsuccessfully argued that GID was a social phenomenon and not a real disorder. One of the expert witnesses, however, testified that remaining ambiguous “will really tear you apart psychologically” and that people suffering from GID are more prone to self castration.
Will Hooters girls be able to deduct breast surgery as a business expense? Actually, yes. According to TurboTax’ website, A stripper named “Chesty Love” decided to increase her breast size to 56FF. She argued her larger “assets” would lead to larger tips. The IRS again disagreed but the U.S. Tax Court sided with Chesty. (Side note – apparently Chesty became so top heavy that she tripped and ruptured an implant.)
We share this story mostly for entertainment. But there is a lesson here for IRS whistleblowers.
You aren’t likely to earn a cash whistleblower reward for reporting a stripper who claims breast implants as a tax deduction. The IRS whistleblower program is primarily designed where taxes, interest and penalties exceed $2 million. (Those would be expensive implants!)
If you have inside information about high net worth individuals or companies cheating on their taxes you could qualify for a reward of between 15% and 30% of the total tax, interest and penalties collected by the IRS.
If you are information doesn’t meet the $2 million threshold or if the taxpayer is an individual and earns less than $200,000, you can still receive an award of up to 15% to a maximum of $10 million.
The IRS believes it loses $450 billion each year because of tax evasion. When that happens, we all pay. By reporting tax cheats, you help keep taxes lower and can earn a cash reward. In most cases, you can remain anonymous.
MahanyLaw is a national, full service whistleblower law firm.