What follows is an example of tax reduction gone wrong. True story:
A woman called me recently to ask me about the legitimacy of a strategy she heard at a conference – apparently a company had convinced her to pay a $500 deposit towards a $7,500 fee for information on funneling her W-2 earnings into an S-corp (she didn’t have an S-corp or any business whatsoever!) and gain access to tax deductions available to business owners. The woman in question was recently laid off, did not make nearly enough money in 1099s to justify opening an S-corp! Also, though she was a healthcare professional – she did not make anywhere near the salary that medical doctors/surgeons make.
I was so happy to advise her to steer her away from paying the remaining $7,000 in “tax planning” fees.
In fact, last year we helped a physician undo several out-of-state LLCs (with the help of an attorney), recommended by the self-same company. It cost him thousands in legal fees.
“Companies” like this give legit tax planning specialists a bad rap and deepen the stereotype that tax reduction is a gray tax area to be avoided at all costs, inevitably leading to IRS audits (or at least some nail-biting).
Please do your due diligence when choosing a CPA for your tax reduction needs. Have any tax reduction questions? Feel free to contact me today!