Tag Archives: #IRS tax code

Pigs Get Fed, Hogs Get Slaughtered

Gluttony is not applicable when you look at the rules set-up when it comes to the IRS, and currently there are 74,608 pages in the U.S. Tax Code, so some may say that the tax code covers greed well enough.  However, there are many areas that cover a lot of overlap, likely some misguided or antiquated rules that are still part of this Code that a lot of people still try to utilize to argue as to what’s deductible and what’s not.

Bad Debt

  • When you look at taking a bad debt deduction on your tax return
  • Where are the documents proving that you tried to collect it such as invoices, collection call documentation notations
  • Did you use the right form to report it on the tax return

Hobby versus Business

  • Do you have a business plan in place
  • What documentation do you have to prove it was an actual business you set-up for the purpose of making a profit
  • What have you done to show you tried to make a profit based upon your expertise and of those around you

Real Estate Professional

  • What is considered passive activity loss versus being considered a professional
  • How good is your mileage documentation in an audit
  • Do you try to write off all of your losses but in all actuality truly being a passive investor

Free Money Always Comes With a Catch

  • Are you aware of the difference between a legal settlement and a tax-free judgment
  • When are gifts actually considered taxable
  • If you’re doing work on the side, you’re paid in cash, are you sure you are not going to be turned in later so that business can take the expense

Failure to Make a Profit Ever

  • There is an estimated amount of 82% of small businesses that fail, with poor cash flow management being the #1 reason, but how long do you shovel the money pit
  • If you’ve had losses for 3 out of 5 years, did you know the IRS can potentially classify your business as a hobby and therefore negate the losses on your filed returns
  • If you try to use the Cohan Rule to where you may have lost or misplaced some of your receipts, having nothing won’t likely work as a defense

Yes, 74,608 pages to the tax code, and people who believe that they won’t get caught because they have paperwork on their side.  However just because something is listed there doesn’t mean that it can’t be applied to benefit you as a taxpayer unless you have a good enough argument.

Dwayne J. Briscoe