Three Catastrophic Tax Myths

Myths abound about income taxes–and how to avoid paying them.  These myths are found in abundance on the internet.   Some are so malicious and so completely unfounded that they appear to be created by the same kinds of people who create computer viruses:  Such people enjoy causing a lot of pain and heartache for others, and they do it just because they can.

Other tax myths are promoted in seminars by salesman who fleece a lot of citizens by telling them what the audience wishes were true–even though none of it is. Believing these tax myths causes unbelievable loss and heartache

These myths give you directions–sometimes very detailed directions–that guarantee only one thing:  you will get into trouble with the IRS, including paying huge amounts–possibly hundreds of thousands of dollars in penalties and fines–and you may also serve prison time.

I have worked over and over with individuals who were trying to recover from the staggering tax disasters created by following such tax myths

Tax Myth #1: The Income Tax is unconstitutional, and  you don’t have to pay if you just use this argument in tax court.
The truth: 

The income tax has been upheld by the Supreme Court, the highest ruling body in the US.  It cannot be legally challenged further.  Unless Congress changes the law to make taxes illegal, they are legal, you do have to pay them, and using the “unconstitutional” argument will flag you as a “tax protestor”.  This will earn you the instant contempt of the IRS, and they will audit you as fast as they can and hit you with the biggest penalties possible.

Tax Myth #2:  The rich don’t pay taxes.   They know all the special loopholes and are able to completely get out of them.
The truth:  

The records of tax courts–and my own experiences as a tax attorney–include plenty of accounts of multi-millionaires going to jail for tax evasion, and paying penalties in the millions of dollars.   The rich who avoid taxes just pay bigger penalties than the middle class who avoid taxes.

Tax Myth #3: You can spend money on a variety of very large purchases, and shield the value of these purchases from taxes if you declare these purchases are being used for business…including your boat, your summer home, your recreational vehicles, your vacations…

The truth:

Any item you own, or any trip you take, can be deducted as a business expense only according to the percentage of time it is actually used for business–which must be documented, and must follow specific rules.  Any time you spend using your assets recreationally counts against the percentage that can be deducted as a business expense.

I have seen individuals lose their entire life savings by falling for this tax myth.

Talk to a real, trained expert in taxation before you attempt a tax “loophole” based on an internet posting or an investment scheme.   To take your tax advice from a “protestors” website is as effective as hiring a vitamin salesman to do surgery when you have a heart attack.

Contact me for professional help concerning tax myths.

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