Loopholes

I’m no fan of needlessly complicating people’s tax situations, and I often remind readers to consider administrative overhead and compliance costs in addition to tax savings when evaluating tax strategies. The following strategies work best for high-net-worth taxpayers and medium to large “small businesses.” I’m not talking about people who think they are high-net-worth, but if even after the estate tax exemption was doubled, you have to file an estate tax return (Form 706), this is you. If your individual or business net worth is in or is approaching the double-digit millions, this may not apply to you – yet. Keep reading anyway because it may be only a matter of time before you can use it or one of your “I wanna be a playa” clients comes to you asking about this strategy because they saw it on TikTok. Keep reading to learn more on how to save.

One of the favorite sayings of my first managing partner, the late Herb Cohan, was “I’d rather owe it to you than cheat you out of it.” To be honest, like some of the other sayings, I was never clear exactly what it meant. Nonetheless, I think it sums up pretty well a tax strategy that is becoming more viable every year. File a timely accurate return and just don’t pay. Wait 10years and celebrate when the statute of limitation on collections runs out. Did you know that not paying can be a strategy to get out of your tax bill? It can be, depending on the qualifications and your specific circumstances. Keep reading to see how to qualify.

Question: We have a client who is moving out of the country, can they qualify for the foreign earned income exclusion? Answer: Deborah C Wood owned a house in Texas but was able to convince Judge Lauber of the United States Tax Court to rule that her true home was Kandahar Airfield in Afghanistan. This saved her most of the $95,301 in additional tax that the IRS was seeking for the years 2012-2016, not to mention penalties and interest. The narrative that allowed her to win the case is worthy of study by those who represent expatriates who may qualify for the foreign earned income exclusion. There is another lesson in the case, though and that is to seek good tax advice sooner rather than later.

Question: Bitcoin being treated as property by the IRS was partially related to not being “legal tender in any nation.” Does the fact that El Salvador is now using cryptocurrency have any cascading ramifications for tax/currency treatment of bitcoin in the U.S.? Answer: The Department of Justice recently issued a news release to strike terror in the hearts of anyone attempting to execute cryptocurrency tax shenanigans. Similarly, the federal court for the Northern District of California entered an order authorizing a John Doe’s summons on Payward Venture Inc. and subsidiaries d/b/a Kraken. The IRS wants to look at the records of U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency during the years 2016 to 2020. What’s with all the sudden interest in crypto, and why are the feds looking to snoop around retroactively? If you’re curious to find out why and how to stay off its radar, keep reading.

Question: Can I increase my business tax deductions with interest the Small Business Administration (SBA) paid during the COVID-19 pandemic? Answer: In short, yes. But it depends on the type of loan, forgiveness options, and loan status. We here at Think Outside the Tax Box sure like the way you’re thinking! One of the benefits created through the CARES Act included payments on existing SBA loans. In addition, new SBA loans created through the PPP and EIDL programs included deferred payments for the first six months of the loan. Depending on your current situation, you may actually qualify for the interest deduction, even if the SBA paid it on your behalf! To learn how to qualify, continue reading.

Prosecutors in New York have charged the Trump Corporation with tax fraud related to deductions of more than $1 million in fringe benefits over 15 years. The Manhattan DA indicted longtime CFO Allen Weisselberg for tax evasion on $1.7 million in business deductions, which paid for an apartment, private school tuition for family members, two Mercedes Benz vehicles, and other perks in exchange for his employment at the Trump Organization. The former President and company spokespeople responded that every company deducts fringe benefits, describing the charges as a witch hunt or political gamesmanship by opponents. If this leaves you a tad confused about whether or not you can deduct fringe benefits for yourself or employees in your small business, rest assured, there is a legal way to do it. Keep reading to discover the right way to deduct non cash or other indirect fringe benefits.

Do you have homes in destination spots? Places where people flock during specific times of the year? Mardi Gras? Spring break? Sports championships or events? Maybe you own a home in places commonly used as film locations? For example, Albuquerque, New Mexico, is often the site for movie and television productions, and it hosts the Albuquerque International Balloon Fiesta every year (excluding global pandemics, obviously). The 10-day long event hosts well over 100,000 visitors to the city each year. But this article isn’t about Albuquerque tourism, it’s about the easiest tax-free money you will ever make.

Looking to write off your favorite wine? Better yet, how about deducting it while lacking the receipts? For nearly a century, freewheeling salespeople, hobnobbers, and schmoozers alike have treated potential customers and employees to fine dining and entertaining all while seeking the maximum tax break in the process with minimal substantiation. While proving these expenses has certainly gotten easier with technology, smart planners have made use of the so-called Cohan rule to enjoy the deductions without the paperwork nightmare. Want to make use of it yourself? Read on to learn more.