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Tuesday, August 7, 2012

Tax avoidance is not illegal, but just smart business

The IRS is hiring over 100,000 new personnel to address tax evasion, non payment of payroll liability and for the performance of audits.  The momentun is shifting away from corporations.   I service a diverse niche of individuals as well as small to medium size businesses which include; medical facilities, manufactorers, retail operations and federal contractors.  What I tend to notice is that many of my clients have kids in college that are in undergraduate and post graduate programs.  In most cases the parents are paying the tuition of about $25,000 which have a limit on the deductions at about $4,000. I am seeing a trend of clients coming from other accountants and tax attorneys that have paid tax liabilities at average of $35K per year.  Additionally, I am seeing retirees withdrawing cash from there IRA's only to realize that they have had a partner (IRS) and have deferred paying taxes into a period of higher taxes.

All of this is resulting from not receiving any advise from their accountants or attorneys.  The right advice would have assisted these taxpayers in avoiding the liabilities that are saddling them with high tax liabilities, levies and payment plans.  Tax avoidance is not illegal, but tax evasion is illegal and celebrities are target practice right now.  If you don't pay the IRS any money and you are W2'd that does not mean that you avoided paying taxes.  The amount that was withheld paid taxes and that means that you are still in the liability section.  Guess what?  In the future the rate of taxation will be higher. 

There is something that you can do about it.  If you are not an entrepreneur and you work 9 to 5 and you are an emptynester start a business today.  If you or in a 401K and close to retirement you are going to have a partner and you will be taxed upon disbursement.  So how do you get the money paid in to the IRS back in the form of a refund?   Make the right investment and get a sizable refund otherwise you could lose about 40% of your disbursement forever.  Seek professional assistance to avoid paying tax liabilities that I consider avoidable. 

Those of you that have businesses that are not structured to provide you with maximum tax benefits find how what changes need to be made to avoid paying taxes.  Tax Avoidance vs. Tax Deferral a no-brainer right now...taxes are increases so avoidance is much safer.  Documentation is key and 3rd party documentation is certainly safe when it comes to large expenses that will be used as a write off. 

IRS Audits are not always avoidable, but it is all about maintaining good verifiable records.  Nothing to fear as long as you plan within the rules and document the activity. Existing businesses should always expand rather then pay tax liability.  All those that have tax accountants and attorney's that are advising them to defer tax liability fire them or ask them to cut the check for the payment of the future liability.  Get savvy attorney's, consultants and accountants in your business now.  They are less expensive then the interest and penalties you will pay if you don't avoid taxation.  For more information or if you have questions email us at or . 

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