Legal Tax Loophole or Tax Scam?

The IRS is cracking down on tax cheats and they’re ramping up their audits. It’s very important to know whether the tax strategy you have is legal or not. If it’s not legal there are penalties of 150% and more!

So, what is a legal tax loophole? A tax loophole is a government incentive to promote public policy. This is something that is purposely in law and available for you. Most loopholes exist for business. For a long time, they were in real estate as well, but lately the real estate loopholes have been closing, just as the market has dropped. Business is the way to go.

There are 3 signs that a strategy is really an illegal scam:

( 1 ) - Who told you about it? Is the promoter willing to sign a tax return or prepare an opinion letter for you? If so, his rep and credentials is on the line just with you. It’s a much better sign it’s legal.

( 2 ) - Shh….. It’s a secret. Don’t tell anyone. There is a fine line here between #1 maintaining confidentiality and #2 having the secret code to never paying taxes and no one else knows it. You don’t want to tell everyone what you’re doing. It’s important to maintain confidentiality. But if you’re warned to not saying anything to anyone, that should be a concern.

( 3 ) Nobody else will understand. This is another one of those possible fine lines. I hate dealing with so-called advisors who say “you can’t do that” when they don’t even understand what “that” is. I shudder when someone asks me to teach their CPA how to do what I do. (Why would I train my competition? Besides that’s a losing proposition. If the CPA cared, they could learn by reading my books and taking my courses. But on the other hand, if someone is telling you they have the super secret method for doing something and no one else in the free world will possibly understand, I wouldn’t trust it.

The bottomline is that you have to figure out who you’ll trust. And then take confident action in the right direction to put you where you want to be.