“Everything is deductible until the audit” is an adage frequently repeated in the tax preparation industry. Generally, it’s mentioned tongue-in-cheek, but today’s taxpayer (and her tax pro boyfriend) may have taken it a bit too literally. Additionally, cutting corners may seem like a time-saving strategy in the moment, but the potential to backfire can’t be ignored. In this case, the taxpayer is about to learn things the hard way.

As tax professionals, we must recognize a profound truth that most Americans never fully grasp: The United States doesn't have a single tax system, it has two fundamentally different systems operating in parallel. Understanding this dichotomy is perhaps the most important insight you can share with your clients, as it forms the foundation for virtually every advanced tax strategy.

The Internal Revenue Code provides several meaningful tools to ease the tax pain when a business fails. The problem is that many of these provisions require advance planning, timely action, or both. If you’re not looking for them, you’ll miss them, and your client will pay for it. In this article, we’ll look at net operating losses, Section 1244, worthless stock and bad debts, the hobby loss rules, cancellation of debt, and key opportunities to look back at prior years.

Life insurance is such a great income tax deal that it really disturbs me when people manage to create income tax nightmares with it. The build-up in value of a whole life policy is not currently taxed if the policy is properly structured. And even better, except for the insured, the proceeds are totally income tax free when paid because of the death either actual or clearly coming soon of the insured. Of course one of the greatest pieces of marketing genius ever was calling it life insurance, as it is in its pure form, actually death insurance. Here are some stories of life insurance tax nightmares and we’ll see if we can draw a moral from them.