Accounting Solutions Ltd.

Retirement Planning Concepts For Entrepreneurs

One of the most common questions I get asked is, "When should I apply for Social Security Benefits?"

My response has always been, "If you can tell me the month and date of your death, then I can easily do the math to tell you the optimal date for the request."

That may be a rather harsh answer, but it brings a murky problem into sharp relief. The problems with retirement planning, especially for entrepreneurs, include the following...

1 - If we knew when you would die, the job would be easier. Without knowing whether you will have a 5 or 35 year retirement, the job becomes a guess.

2 - If we knew how long you will work, the job would be easier for the same reason.

3 - If we knew what would happen to tax law in the next 40 or 50 years, we could make some informed choices. If taxes go up, we would make different choices than if taxes go down.

In other words, retirement planning comes down to a series of educated guesses. No matter what anyone tells you, the truth is that no one ever truly knows.

That's a statement that no accountant should ever be forced to make. But given that fact, here are a couple of things to consider...

The Fallacy of the Qualified Plan

Qualified Plans don't save money on your taxes. The only thing they do is kick the can down the street.

Defined Benefit and Defined Contribution Plans give you a tax break today so that they can charge you more tax tomorrow. The IRS will play that game with you all day long knowing that sooner or later they'll win.

Let's use the example of a 401(K).

You put $20K into your 401(K) in 2026 which saves taxes on that same amount at the Federal and State Level this year. That money grows to $75K over the next 25 years.

You now have to pay regular income tax on $75K. How did you save any money?

Financial Planners will say Au Contraire. When that taxpayer retires they won't need as much money. Their mortgage will be paid, and their kids will be out of college. They'll be at a lower tax rate when they retire so they'll obviously save money.

My response to those Financial Planners has always been something like, "So you're admitting that you're lousy at what you do." When I retire I want to spend more money not less.

I'll be on a 45' Catamaran anchored on the French Side of St. Martin ordering the lobster, not freezing in a Chicago winter shopping at Aldi.

Other critics say, "But what about the employer match?"

When you're an entrepreneur, that's not free money. It's yours.

And did we forget that we had to pay another 15.3% in Payroll Taxes to make that contribution in the first place? How did we save any money?

In this instance wouldn't it have been better to take the $20K out of your distributions and put it into a regular stock account? Think about it.

1 - If it comes out of S Corp Distributions, then you don't have to pay the 15.3% in Social Security and Medicare.

2 - You would certainly pay income tax on $20K today, but when you withdraw the money you would only pay Capital Gains Tax on $55K.

If you normally pay a combined income tax rate of 30% to 40%, the 25% Long-Term Capital Gains rate is a deal. If on the other hand, your combined tax rate is only 15%, then maybe it's not so great.

Hence, the guesswork. If we had a crystal ball, this would be easy.

Another question I get a lot is, "Should I Do A Roth IRA conversion?"

Maybe. Again, if only we had that crystal ball. To understand the potential problems, let's go through some basics.

A Traditional IRA, works the same way as the above mentioned 401(K). You get a tax break today, must pay payroll taxes on the money, and then pay regular income taxes when the money is distributed.

Conversely, Roth IRAs don't give you an income tax break today. You pay regular income tax on the contributions and don't pay any regular or capital gains taxes on the distributions.

If you're sitting on a large Regular IRA, then converting it to a Roth can save a lot of money. But it can also cost you.

To complete a Roth Conversion, you must pay the taxes you would have owed as if the amount were being distributed at the time of conversion. Normally this is done over a period of three years.

So what happens if you pay all of that tax on $1M in your IRA and the market crashes? You're now sitting on $700K. Did you save any money?

Maybe. Maybe not. That depends on when you take the distributions, whether or not it recovers, and to what extent.

What happens if you do the Roth Conversion, pay all of the taxes, and drop dead the next day? Did you save any money?

Nope. Someone always has to pay the tax.

Let me leave you with this...

I really hate being the bearer of bad news, but unlike most of the people in finance working on commissions, I have no reason to lie.

A reasonable question might then become, "So Chris, what should I do?"

Save. Save. Save.

I have always defined a "Successful Retiree" as a person who doesn't have to take a pay cut when they retire. Again, imagine me on the deck of that catamaran with the lobster.

The retirees I have who didn't have to take a pay cut did all of the above.

They have money in Qualified Plans, money in regular stock accounts, and no debt. In other words, they saved.

Get to it already. One last thing.

Using Whole or Variable Life Insurance as a retirement planning vehicle is a rip off.

During the Clinton Administration, when the markets were increasing 30% annually, the Triple A rated life insurance companies were paying 6% and acting like it was a gift because there are no taxes on that money. So if you were to add in the taxes what would that be? Maybe 8%?

What would you rather earn on your money... 30% or 8%? Even if the markets are down, they always rebound.

Life insurance policies have never been a good investment vehicle because they're not a "clean" investment. They have to pay commissions to the salespeople and pay for the management of those life insurance companies.

They always underperform because of these costs.

We buy life insurance because someday we'll die and don't want to leave our spouse and our children with things like a mortgage and no way to pay for a college education. But term policies will do that for a fraction of the cost.

Buy term and invest the rest. And that's only if you need life insurance.

If your house is paid off, your kids are out of college, and you have a few million socked away, do you really need that extra expense? Probably not.

Again, retirement planning for entrepreneurs is completely different. When you have questions, I'm here.

And if you're having problems with your accounting and tax work, I'm waiting for your call.

We're all going to get through this. Let's get through it together..

Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, Accounting and Tax Work, Tax Planning, or Tax Representation, you have but to ask. I'm here and I remain,

Sincerely yours,

Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300

www.AccountingSolutionsLtd.com

Disclaimer: The content on our website or newsletter is provided solely for general informational purposes and should not be construed as tax, accounting, legal, investment, or professional advice of any kind. Accessing this information does not create, and is not intended to create, an accountant-client relationship. This information may not reflect the most current tax laws, paccounting standards, or regulatory developments and may not apply to your specific jurisdiction or circumstances. It is not a substitute for consulting qualified professionals. Before making any decisions or taking any actions, you should seek advice from a professional who is fully informed of all relevant facts pertaining to your situation.

Tax-related content on this site is not intended, nor may it be used by any taxpayer, to avoid penalties that may be imposed under applicable tax laws. To comply with IRS requirements, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties or promoting, marketing, or recommending any transaction or matter addressed herein.

All information is provided “as is,” without any guarantee of completeness, accuracy, or timeliness, and without any warranty, express or implied, including but not limited to warranties of performance, merchantability, or fitness for a particular purpose. We disclaim all liability for any loss or damage arising from reliance on this information.

Links to third-party websites are provided for convenience only; we do not endorse or assume responsibility for their content. All materials are the property of our firm and may not be reproduced without prior written consent.

The Newest Tax Scam That All Entrepreneurs Should Know

This involves purchasing collapsible housing units offered by a Utah-based company where supposedly, you can claim a tax deduction of five times your cash outlay with a rapid depreciation deduction. According to the pitch, purchasers can then rent the unit to government agencies like the Federal Emergency Management Agency, to collect rental income.

The scheme works like this...

1 - The buyer funds an irrevocable grantor trust with a cash payment plus a one-time administrative fee of $5,000.

2 - The grantor trust acquires 99 percent of a new series limited liability company. The parent of that series retains 1 percent and acts both as manager of the series LLC and as trustee of the grantor trust, with broad powers to act on behalf of both entities.

3 - The series LLC then purchases the housing unit using the trust’s contributed cash and a seller-financed loan.

4 - As part of the tax strategy, the duplex requires an up-front cash payment of $130,000 and is assigned a value of five times that amount.

5 - An appraisal provided with the unit, places the value of the housing unit at $663,333. That translates to $1,745 per square foot for a factory-built box house, a valuation on par with a co-op or condominium in Manhattan and higher than one in Palm Beach, Florida.

6 - According to the scheme, the purchaser then takes a rapid depreciation deduction of $650K.

7 - Again, according to the pitch, it can then be rented to the Federal Government to provide cash flow. But there's no evidence suggesting that any federal agency has an agreement to rent any of these structures or has actually done so in the past.

Let me leave you with this...

Did I mention that the company producing the housing units, was founded by a businessman and philanthropist convicted of a felony in connection with a previous business, and its director of investor relations had been accused of deceptive business practices by the Federal Trade Commission?

It appears that the suggested trust structure is modeled after the tax shelters that existed before the Tax Reform Act of 1986 added Section 469 to the IRC, which established passive activity loss limitations to restrict tax shelter abuses. Almost anything that looks, acts, or even smells like one of the old tax shelter schemes is a huge no-no in today's tax environment.

It's true that leveraged deduction tax strategies can involve using debt to finance an investment, So the full amount of the loan, not just the investor’s out-of-pocket cost, can be deducted to lower or eliminate taxable income.

This is akin to purchasing an apartment building for $1M, putting down $200K, financing the other $800K, and then using $1M as your depreciation base.

It's also true that tax strategies can leverage the difference between actual costs and an appraised value. But the appraisal must be reasonable.

And who in their right mind, would ever buy something similar to a mobile home for $650K?

If the IRS determines that the arrangements lack economic substance, a legal term meaning the transaction serves no financial purpose other than to minimize or avoid tax obligations, it can disregard the tax benefits. Even if a taxpayer relied on opinion letters used to promote the strategy to investors, they will probably face additional tax, interest, and penalties.

With that in mind, let me explain the final chapter of this nightmare. This entire scheme is set up to allow the trusts to abandon the investment before the first monthly payments are due.

The financing documents indicate that loan payments wouldn’t begin until January 2027, giving taxpayers time to claim the full bonus depreciation in the first year and potentially exit the strategy before any loan payment is made.

The assumption is that the debts would then be forgiven and the housing unit would then be taken back by the seller and resold to another buyer. The trust would be empty and the financing arm of the company would have nothing to pursue other than repossessing the housing unit.

Please understand that under IRS Rules, forgiveness of debt is a taxable transaction. If you owe a bank $100K and the debt is forgiven, perhaps through bankruptcy, you would then have an economic gain of $100K which is fully taxable.

But if at the time of forgiveness you are considered insolvent under IRS Specifications, you don't have to pay the tax. In this instance, the trust that abandoned the housing unit would have no other assets, and would probably be considered insolvent.

And that's the whole thing in a nutshell. According to their pitch, you pay $150K and get a $650K tax deduction.

I don't know how everyone involved in this isn't already in the slammer. There are any number of reasons why this would never pass an IRS Audit that I've already discussed.

But remember that tax law is an adjunct to criminal law. As such, intent is always a factor.

If your intent was solely to screw the government, what do you think the IRS is going to do? Be nice, shake a bony finger at you, and say that they hope you've learned your lesson?

Or are you the next contestant on that fun-filled family game show titled, "Don't Drop The Soap?"

The thing about these tax schemes is that the Service is slow to act. The old tax shelters that are now completely illegal were sold for 20 years before being outlawed.

Stay away from these schemes like the plague that they are. And realize that anything too good to be true, probably is.

As always, if you're having problems with your accounting and tax work, we'd love to help. Please contact us today.

We're all going to get through this. Let's get through it together..

Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, Accounting and Tax Work, Tax Planning, or Tax Representation, you have but to ask. I'm here and I remain,

Sincerely yours,

Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300

www.AccountingSolutionsLtd.com

Disclaimer: The content on our website or newsletter is provided solely for general informational purposes and should not be construed as tax, accounting, legal, investment, or professional advice of any kind. Accessing this information does not create, and is not intended to create, an accountant-client relationship. This information may not reflect the most current tax laws, paccounting standards, or regulatory developments and may not apply to your specific jurisdiction or circumstances. It is not a substitute for consulting qualified professionals. Before making any decisions or taking any actions, you should seek advice from a professional who is fully informed of all relevant facts pertaining to your situation.

Tax-related content on this site is not intended, nor may it be used by any taxpayer, to avoid penalties that may be imposed under applicable tax laws. To comply with IRS requirements, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties or promoting, marketing, or recommending any transaction or matter addressed herein.

All information is provided “as is,” without any guarantee of completeness, accuracy, or timeliness, and without any warranty, express or implied, including but not limited to warranties of performance, merchantability, or fitness for a particular purpose. We disclaim all liability for any loss or damage arising from reliance on this information.

Links to third-party websites are provided for convenience only; we do not endorse or assume responsibility for their content. All materials are the property of our firm and may not be reproduced without prior written consent.

AI Hallucinated Tax Law Causing Major Problems For Entrepreneurs

A recent Tax Court case, Clinco, T.C. Memo. 2026-16, shows exactly what not to do when using Artificial Intelligence (AI). The decision provides a cautionary example for all entrepreneurs navigating the growing use of AI in accounting, tax, and legal research

The case involved the 2015 tax return of Peter L. Clinco, an attorney and entrepreneur who co-owned and operated MedCafe Westwood, a restaurant and bar near the University of California at Los Angeles.

The IRS audited the return and determined through a bank-deposit analysis that MedCafe’s gross receipts for the restaurant were underreported on Clinco’s Schedule C by more than $2.2M. Additionally, the court found Clinco was not entitled to $56,798 in depreciation deductions for two rental properties due to a lack of substantiation.

He challenged the IRS’s determinations in Tax Court, but the court upheld them. An unusual aspect of the opinion involved Judge Holmes' faulting Clinco’s attorney for submitting briefs citing nonexistent cases that the judge said appeared to have been hallucinated by generative AI.

Among other things, Clinco challenged the validity of a notice of deficiency because it lacked a manual “wet” signature. His attorney cited four cases supporting this argument, three of which the court described as likely large language model AI hallucinations.

The cases the court said appeared to be hallucinations were...

1 - Cacchillo, 130 T.C. 132 (2008): The taxpayer’s counsel claimed this case held that an improperly signed notice of deficiency ousted the court of jurisdiction. In reality, the case doesn't exist.

2 - Miller, 57 T.C. 440 (1971): This citation allegedly clarified formal signature requirements, but the case has no mention whatsoever of deficiency notices.

3 - Tefel, 118 T.C. 324 (2002): The court described this as nonexistent, noting that the cited page actually refers to Hillman, 118 T.C. 323 (2002), a case regarding S corporation management fees.

The court explicitly warned the attorney that submitting a brief filled with fictitious caselaw is a clear violation of Civil Procedures and is a "recipe for sanctions." Judge Holmes further stated that utilizing unchecked AI hallucinations in court is completely unacceptable.

The taxpayer ultimately lost the case on its merits. The Tax Court upheld the IRS's original assessment, holding the taxpayer liable for nearly $2.3 million in tax deficiencies stemming from unreported restaurant income and undocumented depreciation deductions.

Let me leave you with this...

Did I mention that this guy was an attorney? Of course they threw the book at him charging additional tax, interest and penalties.

This isn't an isolated case. There are several that I could have written about, but I used this one because it's such a blatant misuse of AI.

Do yourselves a favor. If you have an accounting or tax question, call a professional you trust and actually listen to their answer.

Don't google the question and then call the professional. Nothing rankles more than a client who wants to take my time to provide a professional answer and then questions it based on an AI answer.

Artificial Intelligence fails for many reasons, but the most common is that it doesn't actually speak our language. We have a specific nomenclature, unused by the outside world, that AI generally can't interpret.

A common difficulty is the use of the words "Self-Employed". In tax law that refers specifically to the law regarding a Sole Proprietor.

But how could generative AI know that this doesn't refer to the President of an S Corp or the Managing Member of an LLC who is also self-employed? Of course, AI gets it wrong.

Don't end up in hot water like Mr. Clinico, the attorney. If you have a question, please call.

And as always, if you're having difficulties with your accounting and tax work, I'm waiting to hear from you.

We're all going to get through this. Let's get through it together..

Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, Accounting and Tax Work, Tax Planning, or Tax Representation, you have but to ask. I'm here and I remain,

Sincerely yours,

Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300

www.AccountingSolutionsLtd.com

Disclaimer: The content on our website or newsletter is provided solely for general informational purposes and should not be construed as tax, accounting, legal, investment, or professional advice of any kind. Accessing this information does not create, and is not intended to create, an accountant-client relationship. This information may not reflect the most current tax laws, accounting standards, or regulatory developments and may not apply to your specific jurisdiction or circumstances. It is not a substitute for consulting qualified professionals. Before making any decisions or taking any actions, you should seek advice from a professional who is fully informed of all relevant facts pertaining to your situation.

Tax-related content on this site is not intended, nor may it be used by any taxpayer, to avoid penalties that may be imposed under applicable tax laws. To comply with IRS requirements, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties or promoting, marketing, or recommending any transaction or matter addressed herein.

All information is provided “as is,” without any guarantee of completeness, accuracy, or timeliness, and without any warranty, express or implied, including but not limited to warranties of performance, merchantability, or fitness for a particular purpose. We disclaim all liability for any loss or damage arising from reliance on this information.

Links to third-party websites are provided for convenience only; we do not endorse or assume responsibility for their content. All materials are the property of our firm and may not be reproduced without prior written consent.

Entrepreneurs Are Taking Advantage Of Illinois' Newest Tax Credit

During a shoot in suburban Chicago last month, Ellen White, the chief executive of sustainability consultancy EcoFixr stood beside a neat row of receptacles marked “landfill,” “compost” and “mixed recycle” while the crew working on a Walgreens commercial finished its catered Mexican lunch. When it was time for the workers to clear their salsa-stained plates, White gently directed each toward the correct receptacle for disposal.

She'd been hired to help the crew comply with new standards established by the Illinois Film Office for projects seeking green certification, a designation that makes those already taking advantage of the state’s Film Production Tax Credit Incentive Program eligible for an additional 5% credit. The production’s bottom line depended on whether the crew scraped what was left of their tacos into the bin designated for compost.

Some of the highlights of the Illinois Film Production Credit include...

1 - The base credit is 35% on qualified Illinois expenditures, including post-production and resident salaries up to $500,000 per worker.

2 - A 30% credit is available on non-resident salaries up to $500,000 per worker which is capped at 13 non-resident crew members.

3 - An additional 5% credit is available on labor expenditures for hiring Illinois residents in counties outside of Cook, DuPage, Kane, Lake, McHenry, and Will counties

4 - There's another 5% credit when a television series relocates to Illinois.

5 - And an additional 5% credit for projects certified as sustainable green productions through the Illinois Film Office.

Further qualifications include...

1 - A minimum spend of $100,000 for projects over 30 minutes and $50,000 for projects under 30 minutes.

2 - Expenses incurred from the final script stage through the end of post-production are eligible.

3 - Claims must be filed upon completion of production and no later than two years following completion

Let me leave you with this...

For years, California officials agonized over rising competition from a few select locations in North America. First came British Columbia, New Mexico and Louisiana, then Georgia, New York and others that made themselves viable alternatives to shooting in the so-called "Thirty Mile Zone" around L.A. Studios. Now the playing field has expanded even further.

California lost more than 42K film and television jobs in Los Angeles County between 2022 and 2024 .

Illinois received a major boost in 2012, when the Dick Wolf-produced NBC procedural Chicago Fire began shooting here, soon followed by sister series Chicago P.D. and Chicago Med. The trio is filmed at Cinespace Studios, a sprawling facility housed in a former steel plant on Chicago’s West Side.

Illinois has become the sunny obverse of California, where years of policy drift squandered the state’s competitive advantage and left it playing catch-up. Our state is now No. 6 among U.S. film and television production destinations, according to an analysis of publicly available data by Entertainment Partners, a production-services company.

Last year, Illinois provided $210 million in incentives, which generated $703 million in production spending.

While California lawmakers wrestled with the status of the state’s incentive program, more than 25 films, television shows, and commercials were either in production or preparing to shoot in Illinois during a week in early July. Among them was the Walgreens commercial crew.

They weren’t just making an ad. They were also composting.

Back in the early '70s under Boss Daley, Chicago was a Union Town. And if you were going to work in theater you had to join the union.

So I became the youngest member at 4 years and 11 months old to ever join Actor's Equity back in 1970. I was cast to play Tiny Tim in A Christmas Carol at the now shuttered Mill Run Theater.

I held that distinction for almost a year until some rugrat beat me by a lousy three weeks.

Since many of the larger Ad Agencies were here back then, Chicago was also a major hub for producing commercials and other ad campaigns. I found myself doing tons of commercials both on and off camera.

As a retired member of SAG, AFTRA, and Actor's Equity, my firm has always been the go to shop for many Production Houses, Entertainment Venues, and Individual Entertainers. Since a lot of this work is coming home, I find myself going to Los Angeles a lot less.

The last time I flew home, it took forty-five minutes for my Uber to get from Gate 1 to Gate 7 at LAX at 2 PM on a Thursday! Has it ever taken you the better part of an hour to get anywhere at O'Hare?

At least I'm wasting less time in Ubers nowadays.

If you have questions about these Illinois Film Credits or are having difficulties with your accounting and tax work, I'm waiting for your call.

We're all going to get through this. Let's get through it together...

Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, Accounting and Tax Work, Tax Planning, or Tax Representation, you have but to ask. I'm here and I remain,

Sincerely yours,

Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300

www.AccountingSolutionsLtd.com

Disclaimer: The content on our website or newsletter is provided solely for general informational purposes and should not be construed as tax, accounting, legal, investment, or professional advice of any kind. Accessing this information does not create, and is not intended to create, an accountant-client relationship. This information may not reflect the most current tax laws, accounting standards, or regulatory developments and may not apply to your specific jurisdiction or circumstances. It is not a substitute for consulting qualified professionals. Before making any decisions or taking any actions, you should seek advice from a professional who is fully informed of all relevant facts pertaining to your situation.

Tax-related content on this site is not intended, nor may it be used by any taxpayer, to avoid penalties that may be imposed under applicable tax laws. To comply with IRS requirements, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties or promoting, marketing, or recommending any transaction or matter addressed herein.

All information is provided “as is,” without any guarantee of completeness, accuracy, or timeliness, and without any warranty, express or implied, including but not limited to warranties of performance, merchantability, or fitness for a particular purpose. We disclaim all liability for any loss or damage arising from reliance on this information.

Links to third-party websites are provided for convenience only; we do not endorse or assume responsibility for their content. All materials are the property of our firm and may not be reproduced without prior written consent.

What All Entrepreneurs Should Know About The Voluntary Disclosure Program

The IRS Voluntary Disclosure Program (VDP) has long offered taxpayers with unreported income a path to compliance before the agency discovers the problem independently. In 2026, proposed changes to the program's penalty structure are reshaping the math in our favor for coming forward.

Major changes in the proposal include...

1 - The program replaces the current 75% civil fraud penalty with a standardized 20% accuracy-related penalty.

2 - Taxpayers generally disclose income and assets over a six-year period.

3 - The agency aims to process and close cases within a 120-day target.

4 - Participants must pay all owed taxes, interest, and penalties in full within three months of receiving conditional approval, meaning installment plans are not allowed.

The program covers a wide range of situations, including but not limited to...

1 - Unreported foreign bank accounts and offshore income,

2 - Unreported domestic cash business income,

3 - Cryptocurrency gains,

4 - Freelance earnings,

5 - And inherited accounts generating taxable returns.

The most significant benefit is that taxpayers who come forward before the IRS initiates an examination generally avoid criminal prosecution. Given that willful tax evasion carries potential prison sentences of up to five years and fines up to $250,000, the civil penalty route represents a fraction of the criminal exposure.

Let me leave you with this...

I had a guy walk into my office last Monday for a complimentary tax planning session. The IRS was auditing his 2024 and 2023 Personal Income Tax Returns.

He had over $700K in W-2's on the return and several Airbnb rentals. He'd completed the returns himself using a common store bought tax program.

I looked at the 2024 return and immediately focused on a Schedule C Sole Proprietor's Return with $70 in income and a deducted loss of over $59K.

I asked him what this was and it was one of his Rental Properties. Of course, passive income such as this belongs on a Schedule E with Real Estate, where the loss would have been limited to $25K.

But I started picking through the individual deductions, and he had claimed an auto expense deduction of over $23K. At $0.67 per mile, that came to over 34K miles!

I asked him how it was possible to drive over 34K miles and only earn $70 in gross income? He asked me why I was talking about mileage.

The $23K was the total amount he had paid for the car, which, of course, can't be deducted.

There were other glaring mistakes, like claiming a $59K deduction with only $70 in income. How this guy expected to be audited and not put into the slammer is beyond understanding, but I'm sure you catch my drift.

I hadn't seen a more glaring example of income tax evasion in quite some time.

He asked what he should do and I told him that he should immediately go to the Revenue Officer, plead ignorance, show them everything that he had done wrong, and beg for mercy.

He looked at me like I was nuts and asked, "Why would I ever do that? Even in a full audit, the IRS probably won't catch half of what you noticed."

I asked the man politely to leave. Okay, maybe I wasn't so polite.

It should be understood that tax law, being an adjunct of criminal law, is about intent. If they can prove willful intent, they can and will throw the book at you. He was already being audited, so the VDP wasn't an option.

But understand that if you find yourself in one of these situations, for whatever reason, the program is probably a great idea. It lowers the penalty from 75% to 20% and generally removes the potential for jail time.

Tax compliance is a religion to most IRS Employees. If you can show them that you had a "Come To Jesus" moment, have seen the error of your ways, and won't do it again, they'll probably go easy on you.

If not, then you could be the next contestant on that fun-filled, family gameshow called, "Don't Drop The Soap."

Think about it.

If you're having problems with your accounting and tax work, we'd love to help. Please click the button below to schedule a complimentary tax planning appointment. You'll be glad you did.

We're all going to get through this. Let's get through it together..

Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, Accounting and Tax Work, Tax Planning, or Tax Representation, you have but to ask. I'm here and I remain,

Sincerely yours,

Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300

www.AccountingSolutionsLtd.com

Disclaimer: The content on our website or newsletter is provided solely for general informational purposes and should not be construed as tax, accounting, legal, investment, or professional advice of any kind. Accessing this information does not create, and is not intended to create, an accountant-client relationship. This information may not reflect the most current tax laws, accounting standards, or regulatory developments and may not apply to your specific jurisdiction or circumstances. It is not a substitute for consulting qualified professionals. Before making any decisions or taking any actions, you should seek advice from a professional who is fully informed of all relevant facts pertaining to your situation.

Tax-related content on this site is not intended, nor may it be used by any taxpayer, to avoid penalties that may be imposed under applicable tax laws. To comply with IRS requirements, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties or promoting, marketing, or recommending any transaction or matter addressed herein.

All information is provided “as is,” without any guarantee of completeness, accuracy, or timeliness, and without any warranty, express or implied, including but not limited to warranties of performance, merchantability, or fitness for a particular purpose. We disclaim all liability for any loss or damage arising from reliance on this information.

Links to third-party websites are provided for convenience only; we do not endorse or assume responsibility for their content. All materials are the property of our firm and may not be reproduced without prior written consent.