☘️ Finding tax gold this St. Patrick’s Day

This St. Patrick’s Day, everyone’s hunting for gold, but the IRS already knows where yours is.

This week’s lineup:

IRS Survival Guide

📵 The IRS Will Never Ask for a Gift Card

The phone rings right as you’re sitting down for dinner. The caller ID is a weird, unknown number, but you answer anyway.

A stern, robotic voice, or perhaps a very insistent man named “Agent Johnson,” informs you that you’ve committed tax fraud and the local police are on their way to your house at this very moment.

It’s a script designed to elicit one thing: sheer, blind panic. They want to scare you so badly that you forget to think.

But thinking is precisely what will save you.

The Real IRS is Gloriously, Predictably Boring

The secret to spotting a scammer is that they act nothing like the real IRS.

The real IRS is a bureaucracy of magnificent and glacial slowness. It runs on paper, procedures, and patience. It does not run on high-stakes threats and gift cards.

They Really, Truly Love the Mail

The IRS initiates almost all critical contacts, especially regarding issues such as audits or unpaid bills, through the U.S. Postal Service. You will get an official-looking envelope, probably several of them, long before you ever get a legitimate phone call from an agent about a debt.

The idea that they would call you out of the blue with a threat is, frankly, hilarious.

They Don’t Do High-Speed Threats

Real IRS agents don’t threaten to have you arrested “in the next 30 minutes” or deported. Now, this doesn’t mean they’ll never show up at your door. Unannounced visits from IRS agents are rare but very, very real. But the process of collecting taxes is a civil matter, not a high-speed police chase. Their most fearsome weapon is a form letter, not a pair of handcuffs.

Find out the four red flags that instantly reveal an IRS scammer, and exactly what to do if you get one of these calls. Keep reading →

Business & Gigs

💸 Tips Are Tax-Free(ish)

Most tax laws are named by people who think “reconciliation” is a fun weekend activity. But the 2025 tax landscape brought us something special: The One Big Beautiful Bill Act (OBBBA).

Buried inside this legislation is a golden nugget for servers, bartenders, hairstylists, and anyone else who lives on the kindness of strangers. It’s called the “No Tax On Tips” provision.

Basically, the government has decided to stop taking a cut of your tips — up to a point. But because this is the IRS, they couldn’t just hand you a bag of cash. They had to create a new form, a weird code, and a logistical hurdle that might make you want to scream into a walk-in freezer.

Here is how to get your money without losing your mind.

The $25,000 High-Five (What You Actually Get)

For tax years 2025, 2026, 2027, and 2028, you can deduct up to $25,000 of qualified tips from your taxable income.

Think of this as a four-year happy hour for your tax return. This isn’t a credit; it’s a deduction that lives on the brand-new Schedule 1-A. If you earned $25,000 or less in tips, the IRS essentially agrees to pretend that money never happened. It vanishes from their radar, like a spilled drink on a busy Saturday night.

The only catch on the timeline? It’s temporary. The party ends after 2028, so enjoy the open bar while it lasts.

Are You Too “Rich” for This Deduction? (The Phase-Out)

Naturally, there are rules. The government assumes that if you are a bartender making investment banker money, you don’t need the help.

The deduction starts to disappear once your modified adjusted gross income (MAGI) hits $150,000 (or $300,000 if you are married and filing jointly).

For every $1,000 you earn over that limit, you lose $100 of the deduction. If you are waiting tables and clearing $160,000 a year, first of all, congratulations. Second of all, don’t expect the full perk.

The “Box 12” Trap (Or: How Your Boss Could Ruin This)

You knew there had to be a villain in this story, and unfortunately, it might be your manager’s incompetence.

You cannot just estimate your tips on a napkin and tell the IRS, “Trust me, bro.” To claim this deduction, your tips must be “qualified.” That means they have to be officially reported on statements furnished to you — specifically, your W-2 or 1099 forms.

You are looking for a specific magic spell: Code “TP” in Box 12 of your W-2.

If your tips aren’t codified there, or if your employer’s payroll software is from 1998 and doesn’t know how to generate that code, you have a problem. The system gave you a tax break, but it hid the key in the HR office. If your employer doesn’t report it correctly, the IRS machine won’t validate your deduction.

2025: The Year of “We’ll Fix It in Post”

If you are filing for the 2025 tax year (which you probably are doing right now in early 2026), things are messy. The legislation explicitly admits that many employers and payors are “not equipped or ready to handle the reporting yet.”

That is legal speak for, “Everyone is confused.”

There is a transition period for 2025. This likely means the IRS will be slightly more forgiving if your paperwork isn’t perfect, but it creates a massive gray area. You might know you earned the tips, but your form might not say “TP.” This puts you in the fun position of having to explain tax law to your boss, which is a conversation everyone loves having.

Find out exactly how to claim your deduction, and what to do if your employer dropped the ball on the paperwork. Keep reading →

Filing 101

💸 The Tax Credit That Pays You Back

Few things in life are certain, but the quiet dread that accompanies tax season is one of them. It’s a time for digging through receipts and staring at forms that look like architectural blueprints for a very confusing prison.

But buried in that labyrinth of tax code is something designed not to take your money, but to give some back. It’s called the Earned Income Tax Credit (EITC), and it’s basically the government’s way of giving a financial high-five to working folks. 

The only catch? To get this high-five, you first have to solve a riddle wrapped in an enigma, sponsored by the IRS.

So, What in the World Is the Earned Income Tax Credit?

In simple terms, the EITC is a tax break for people with low-to-moderate earned income. “Earned income” is the key phrase. It’s money you get from working a job, either for someone else or for yourself. This isn’t for lottery winnings or that suspiciously large check from Aunt Mildred.

What makes the EITC the star of the tax credit world is that it’s refundable. Most tax credits can only reduce your tax bill to zero. A refundable credit is a different beast entirely. If the credit is bigger than the tax you owe, the IRS doesn’t just call it even. They actually send you the leftover amount as a refund. 

This is how some families end up with a “negative tax burden,” meaning they get more back from the system than they paid in.

The Great Qualification Quest: Are You One of the Chosen Ones?

This is where things get a bit complicated. The IRS has a set of rules that can feel a little tricky, but they’re manageable when you break them down.

The Basic Rules of the Club

First, everyone who wants to claim the EITC has to meet some ground rules.

The All-Important “Qualifying Child”

The size of your credit is hugely dependent on whether you have a “qualifying child.” The IRS has a precise definition for this, and your child must pass four tests, like some kind of tiny tax-law Olympian.

If a child qualifies as a dependent of more than one person (common with separated parents), “tie-breaker” rules usually give the credit to the parent the child lived with the longest.

Flying Solo: Qualifying Without Children

No kids? You can still qualify for the EITC, though the credit is smaller. You generally must be between the ages of 25 and 65, live in the U.S. for more than half the year, and not be claimed as a dependent on someone else’s return.

Find out how to actually claim this credit, and the simple mistakes that could get you banned from it for years. Keep reading →

Wild Tax Tales

🎲 The Gambler Who Tried to Beat the IRS

J.P. Sanford, a Texas attorney, went to Las Vegas in 1962 with a plan. He believed he had a system to turn the game of craps into a profitable enterprise. Like any aspiring businessman, he also thought he was entitled to deduct his expenses.

After a trip spent at the craps tables, he tallied up his travel, food, and lodging costs to $571.20*. He then claimed the entire amount as a business deduction on his tax return.

*Based on the Consumer Price Index (CPI) data from the Bureau of Labor Satistics, J.P. Sanford’s $571.20 deduction in 1962 would be equivalent to approximately $6,152.46 in 2026.

The IRS Calls His Bluff

Sanford’s reasoning was simple: he argued he was in the “trade or business of gambling,” which made his trip a necessary professional expense. The IRS, deeply skeptical of such remarkable optimism, saw a lawyer on vacation. They promptly disallowed the deduction, classifying the trip as a personal expense and his gambling as, at best, a hobby.

But Sanford was an attorney who believed in his argument. He was willing to fight for his deduction, and so this dispute over a $571 trip ended up in the U.S. Tax Court.

Business or Hobby? A Billion-Dollar Question

The case boiled down to one of the most fundamental questions in tax law: what separates a business from a hobby? 

The answer determines whether your expenses are deductible. The court looks past a taxpayer’s stated intentions and examines the cold, hard facts. The judge asked a series of practical questions:

Of course, scrutinizing gambling profits was nothing new for the government. Learn all you need to know about what happens to your winnings. (You can read that full article here.)

The Verdict: A Losing Hand

On all of these fronts, Sanford’s case crumbled. He had kept no credible, businesslike records. He was a full-time attorney, and his income came from his law practice, not the casino. The judge concluded his actions were indistinguishable from those of any other hopeful tourist trying their luck.

The court ruled decisively in favor of the IRS: the gambling was a hobby, the trip was a personal vacation, and the deduction was denied.

The Sanford case is a timeless lesson. The tax code makes a clear distinction between a business and a hobby, and simply wanting to make money isn’t enough to cross that line. Today, professional poker players successfully deduct travel expenses, but they also keep meticulous records and treat it as a full-time job. They can prove they are running a business.

Mr. Sanford couldn’t. He had the dream, but he didn’t have the receipts, and in the eyes of the Tax Court, that makes all the difference.

The quick (and slightly prickly) stories we didn’t have time to get to:

If you made it this far, you’re our kind of nerd. Hit reply and tell us which story you want us to dive deeper into next week.