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Some of What You Need to Know to Do 1041 Right Because Nobody Knows Everything
There was a recent IRS memo from an associate chief counsel that should be shocking but actually isn’t. Promoters have for many years been hawking a “copyrighted non-grantor irrevocable complex discretionary spendthrift trust,” which purported to avoid capital gains tax. You could learn about it on TikTok. It “worked” by citing Section 643(a)(3), which excludes capital gains allocable to corpus from distributable net income. You and I both know that DNI is not taxable income, but not everybody who learns the tax law from TikTok has caught onto that subtle point yet. Although I have never encountered anything as egregious as the “copyrighted, etc, etc, trust” I have seen a lot of problems with trusts over the years (and partnerships and SALT – don’t get me started). Much of it has to do with working under a lot of pressure. Often, the things that are wrong end up not mattering all that much, but I get a little frightened, because maybe one of these days the IRS is going to start getting its act back together. If it does, I think things may be a little shocking to practitioners who have grown up in an environment where enforcement has been progressively gutted.
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CURRENT EDITION
This Is The Only Other Year-End Tax Tip Guide You Need
So as I did last year, I have reviewed a multitude of year-end tax tips articles. One of them is a real standout that you should be sure to check out. If you missed it, you should definitely roll back to the November 15 edition and go over Dominique Molina’s piece, which focuses on what you need to do sooner rather than later in response to OBBBA. It provides more detailed, relevant, actionable advice that you won’t see anywhere else than any of the multitude of pieces I have reviewed. As for the rest, I will give you a basic rundown of what I call the SOSO (same old, same old) and a few suggestions that stand out as different that I will get into a little more along with some thoughts of my own.
The Corporate Vault: How to Use a C Corporation to Stockpile Cash for the Future
When most people think about saving for the future, their minds jump to retirement accounts—401(k)s, IRAs, maybe even defined benefit plans. But business owners have another option that often goes overlooked: using a C corporation as a strategic savings vehicle. By leveraging the flat 21% corporate tax rate, smart income shifting, and careful timing of distributions, business owners can “stockpile” cash inside a corporation, building wealth for future use without the red tape of traditional retirement plans. Want to see how top tax strategists legally use C corporations as private retirement vaults while avoiding double taxation and IRS scrutiny? Continue reading to learn the blueprint.
When TikTok Tax Hacks Backfire: Helping Clients Misled by Social Media Scams
Jessica, a self-employed consultant, was thrilled when she found a viral TikTok video promising a “little-known” tax trick. The video claimed she could get a huge refund by claiming a special Fuel Tax Credit and even writing off her family’s beach vacation as a business expense. Following the advice, Jessica filed an amended tax return and waited eagerly for a windfall. A few months later, instead of a refund check, Jessica received a stern IRS notice. Her so-called credits were disallowed, her refund was denied, and she now faced penalties. Jessica isn’t alone. Every tax season, well-intentioned taxpayers get lured by false tax advice on social media, only to end up in trouble. As tax professionals, we often meet panicked clients like Jessica who need our help to untangle the mess.
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Think Outside the Tax Box provides tax reduction strategies along with practical
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