This past week, I’ve run into a couple of situations where someone wasn’t happy with the advice I had given and quoted something they found on the Internet or heard from a non-professional. (By professional, I mean a licensed tax professional such as a CPA, tax attorney or IRS Enrolled Agent. A non-professional is somebody who doesn’t have the credentials to back up what they say. )
It’s not a new problem. Back in the day when I did a lot of live seminars, there would always be someone who wanted to argue by quoting a non-professional (next door neighbor, aunt’s best friend, etc.)
One of the cases was someone who read an article I wrote over 7 years ago about what it takes to be a real estate professional. The article was correct, but not complete. I should point out that you should always get the advice of a tax or legal professional before you put any strategy in place that you just read about. You have no idea how old the article is, whether the author really knew what he was talking about or whether your circumstances make this a viable strategy. You need to get the advice from someone who really understands the law and your personal circumstances.
I told him that his interpretation of the old article was not correct and offered some suggestions on how he could take legally reduce his taxes. He insisted on claiming that the article was right and that I had misunderstood, even though I was the one who wrote it! In the end, I had to withdraw from the engagement and give him his money back.
I’ve said before, “What would you like the answer to be?” There is almost always a legal way to achieve your tax goals, provided you have enough planning time, are willing to pay for the legal and tax experts you need and follow the plan. But you can’t just search around for the answer you want, without paying attention to what the rules are. That’s how you end up in jail.
In the second case, a client of mine had been enamored with the idea of having an offshore tax strategy. I wanted to wait until we had taken advantage of all of the tax breaks we could here in the US. The reason is because it’s simpler and cheaper to set up a domestic tax strategy. My client didn’t want to wait. He talked to some promoter who had no professional credentials and set up an illegal offshore tax strategy. The promoter’s solution for handling the very clear US rules was to ignore them and advise my client to just keep it secret. That, of course, is against the law and luckily they brought me back into the loop before it was too late. It took a total of $35,000 to fix, but they were finally able to unwind the offshore structures. They could now move forward with LEGAL offshore tax structures that would help them save taxes. And this time they are complying with all of the US rules.
If you’re taking tax advice from the Internet, make sure you understand the details and that the article is up to date. And, talk to a qualified tax professional before you do anything drastic. If you talk to someone about your tax plan, make sure they are qualified to give you advice.