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Last chance to avoid these tax scams and risks


With tax-day right around the corner we take a final look at scams, mistakes and seasonal risks to avoid while you still can.

taxes | © Jemastock - stock.adobe.com

© Jemastock - stock.adobe.com

We’ve covered a variety of abusive tax plans marketed aggressively to doctors on a regular basis and with April 15th on the horizon, the pressure to buy is in high gear. Here’s an executive summary of issues to be on the lookout for before you sign your tax return. As always, nothing in a general format like this is tax or legal advice. Get the help of experienced, licensed professionals that is specific to your facts, as you are always legally responsible for the information on your tax return no matter who you took the advice from.

Beware of social media advice

I see a variety of scams and bad ideas marketed on social media platforms including Facebook, Instagram and Tik Tok daily, including in physician finance groups. These clips by both lay people and licensed professionals exemplify the old adage, “A little knowledge is a dangerous thing” and often dangerously misstate the use of familiar sounding and legitimate tools, tax law, and in the worst cases, even encourage abusive or criminal acts.

Measure twice before deducting that new Escalade

We previously examined the Tik Tok promoted myth of the “millionaire SUV tax loophole” and looked at why so many doctors and business owners are buying new cars before the end of the year. An expert CPA provided some of the details to consider. Bluntly, you can’t just buy a car for yourself or your spouse and write the entire thing off this year without 50%+ qualifying business usage.

Know the "Dirty Dozen"

One of the most basic tools to use when screening any tax strategy is the I.R.S. itself. The service produces detailed, consumer friendly information on nearly every topic including the most prevalent scams, known as the annual “Dirty Dozen” list. We have covered almost every one of these issues in detail in past articles but this a great list that may help you identify when you need to do some serious due diligence.

Spot frivolous tax arguments and the grifters that sell them

I’ve previously covered some of the common frivolous arguments that involve the taxation of trust structures as well as some of the buzzwords promoters use and the red flags to look out for. If any of these scenarios resemble the planning you have engaged in, get a review of any actions you may already have taken by a third-party CPA or tax lawyer right away.

Be conservative with conservation easements

When done right, conservation easements allow property owners to separate various rights associated with ownership of a specific piece of real estate and give those to a qualifying organization, creating a tax-deductible gift that may reduce income tax, property taxes and estate taxes because the subject property can’t be freely developed or changed. Unfortunately, due to abusive filings by promoters, an otherwise legitimate strategy has earned a spot on the Dirty Dozen list and we’ve previously covered some of the badges of abuse the service is looking for.

Beware of dangerous exit strategies

One consistent area of abuse is the planning surrounding the sale of a business including but not limited to a medical practice itself.I previously covered the use of abusive trust structures with some combination of the following legitimate descriptors, “Non-Grantor, Irrevocable, Complex, Discretionary Spendthrift”. These trusts falsely claim they can reduce or eliminate your capital gains tax obligations while also leaving the sales proceeds liquid and available for your use.

ERC claim abuse – Do you need a “mulligan”?

Employee Retention Credit (ERC) programs allowed employers who retained employees despite verifiable covid-related downturns in revenue during specific quarters of 2020 and 2021 to get a refund of the employment taxes they paid, up to a maximum of about $26K per employee. As I previously warned readers about last year, the ERC program has been subject to widespread abuse. If you aren’t confidence in the claim you are about to make or have recently made, the I.R.S is offering a chance for you to withdraw an “inaccurate” ERC claim and avoid the potential fines and penalties involved.

This list certainly isn’t complete but it does provide detail on some of the most prevalent abusive planning being promoted and some of the red flags the I.R.S is looking for. Make sure you have professional counsel on any tax plan you are considering, it’s always cheaper than paying a tax lawyer for defense.

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