The Wrong Tax Strategy Can Land You in Jail

This post is in: Business, Real Estate


Every year, we meet a few people who are trying to get out from an under a big tax mistake that they made. For example, this past month I reviewed the records (as part of our FREE CPA tax review offer) for a successful business. The owners made good money and had landed some big contracts, in spite of the recession. But they had one big problem. They hadn’t filed tax returns for their business or personally for 3 years. Why?

Well, they knew there had to be a better answer when they started paying big bucks in taxes, so they shopped around the Internet and found a guy who claimed to have all the secrets. He and his sales team were very persuasive. They signed on and set up an LLC in another state to avoid California tax (even though they lived in CA and the business was located in CA). They formed a C Corporation to be one of the managing members of the LLC. And guess what! By using the secrets that only this super salesmen knew, they started writing off all their personal expenses in the C Corporation – including their housing costs, food, travel, clothes…you name it, they wrote it off. Then they couldn’t find a CPA to fill out their tax returns to support this new program. By the way, they’d paid over $25,000 for the program.

And here they were 3 years later, still looking for a CPA who understood the ‘secrets’ so they could get their tax returns filed.

Have you already guessed what happened next? There were no secrets. The guy was just one of those snake oil salesmen who tries to sell you something that is simply too good to be true. Thank goodness they get that it won’t work and now we have to unravel what happened and get the past due returns filed ASAP.

Lesson: Don’t jump into a tax ‘strategy’ without making sure it’s legal. One clear sign of a true professional is someone who will give you an opinion letter (like an attorney) or prepare and sign your tax return (like a CPA). Anyone else simply isn’t qualified to advise you on tax work. Or if they do advise you, they have no reason not to just tell you anything they think you want to hear. That’s because they aren’t putting their name on the line by signing for responsibility of the program.


  1. Clint says:

    Great article! I wonder if this is the same accountant who was doing Wesley Snipes’ returns?

    That’s why we’ve written a few times about making sure that your preparer/consultant is LICENSED, whether it is a PTIN holder or a CPA or EA, a tax pro should have to show ID before making such outrageous claims.

    In this case, it goes to show the old saying “if it sounds too good to be true, it probably is.”

    Glad that he came to you before it was too late!

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