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Archive for November 21st, 2009

Warning! Fake Tax ‘Experts’ Ahead

 By David Roberts

 Introduction

 My name is David Roberts; I have a Masters Degree in Accounting and Business. I am a Certified QuickBooks ProAdvisor and a Certified Profit and Growth Expert. I have ten years plus tax preparation experience with four different types of software. I have trained people for the last three years in tax preparation for companies like Jackson Hewitt, Liberty Tax Service and Intuit (makers of Turbo Tax Online help). I am hesitant to tout myself as a tax expert because the laws change every year, forms are added, forms are removed and tax tables change often during the tax season you are working in. I am more than competent and feel confident in filling out any tax form that exists, but I still prefer to think of myself as a tax professional rather than a tax expert. Having said this however, I have to warn you that there is a ‘multi-level marketing’ group that is touting themselves as being tax relief (or reduction) experts or planners when the truth is that they wouldn’t be able to tell you the difference between a 1040 and a hole in the ground, or between a W-2 and a W-4.

 Where They Come From

 Perhaps a little background is necessary here. Before I started my Masters Degree program and before I had a clear direction in my life I was, as so many have been before me, sucked in to a MLM group that specialized in selling legal services as a sort of pre paid insurance type of service. It’s not really a bad idea, it could be rather profitable, and handy if they had ever chosen a law firm that was willing to actually fulfill the stated requirements on their pamphlets. In reality, only about 2% of the sales agents for this group ever actually make enough to pursue its sales full time. One of the ‘benefits’ of being a part of this ‘business’ is that one can actually deduct all the losses of this ‘activity’ and if you engage in this business, trust me, “There Will Be Losses” .

After about two years of pushing everyone I knew away from me trying to sell this “plan”, I realized that it was all just a sugar coated B S Pill. The dreams of being or getting rich are the sugar coating, everything else is B S. Eventually, everyone smells the B S and so eventually will you taste the B S. So I got out, and got smart and started training myself for a real career.

Okay, now you know the background. Lately, this same group with the pre paid legal insurance plan have begun touting this ‘new’ thing. They take the major benefit of having this business (deducting the losses) and turn it into its’ own MLM.

At best the sales agents go to a weekend training seminar or read a book and start telling everyone that they are ‘Tax Reduction Specialists’. It’s a little bit like your Kindergartner coming home to ‘teach’ you math, it can be cute, but not in this case. The emphasis is on deducting your vacations, hiring your children and deducting their pay, using your vehicle for your newly found ‘business’ and deducting mileage and using a room in your home as your ‘office’ and deducting rent, mortgage, utilities etc.

Reality Check

If it was in reality, legal to deduct your vacations, everyone would be doing it. What they don’t tell you is that, yes, you can deduct SOME of these expenses, but the IRS in an audit will require proof that it was a business trip, and not just a jaunt to the Islands for some fun. If you met for ten minutes on a week vacation, that is NOT business. They will ask for receipts, want to know what business you performed who you met with and why and in cases where this type of Fraud is suspected, they will VERIFY this information.

Can you hire your children and deduct the salary? YES! But then you have to have your children’s taxes prepared as they will owe Social Security, Medicare and other taxes as self employed independent contractors. THEN, you have to convince the IRS auditor that your 12 year old is an independent contractor and NOT an employee. (Good luck with that one.) If you do hire them as employees, then you are responsible to file the federal and state unemployment, workers compensation, and pay half the payroll taxes out of your newly found company. If you aren’t doing that then you cannot hire your children and deduct the expenses!

You will have to have a mileage log in written form to prove that your business mileage is business related and not just a trip to the local grocery store. If you only have one vehicle, there will be close scrutiny of your mileage logs if you claim 90% business use.

Then we get to the home office. There is a test used by IRS auditors to determine if the home office is allowed as a deduction. This test involves the use of two words, “Regularly” and “Exclusively”. Let’s look at the first one; “regularly” i.e. do you maintain regular office hours? If you only use the room sparingly as an office, the deduction will not be allowed. That’s simple enough, right? What about “Exclusively”?

An IRS auditor goes into one of these rooms (offices) and looks around. Hey, you have a computer; do the kids ever play games or check emails on this computer? Yes? The deduction is disallowed. Hey, there’s a television in the room, do you watch the TV? Yes? The deduction is disallowed. What about this Murphy bed? Only used one weekend a year when Aunt Sally visits? The deduction is disallowed. If you think I am exaggerating, call the IRS and ask them their definition of “exclusively”.

Why Are They Promoting This?

This is a very underhanded way they can use to snare you into the MLM way of life. Let me assure you that 95% of these people struggle to make ends meet and having been a part of it I have seen the misrepresentation at work to try to convince you that they are doing better than they actually are. So why would they promote this ‘tax-reduction’ scheme?

Because it sounds so good to be able to deduct all those expenses you normally pay so you can keep more of what you make, you may start looking for ways to own your own business so that you can do so. What? You don’t own your own business? Here’s one that’s for you, sell a pre paid legal insurance plan! And YOU have been recruited into their all encompassing scheme to sign up more suckers to sell this hyped up service that is no better than the soap from Amway or the vitamins from Shaklee. That’s it! They promote themselves as experts in taxation so they can get more recruits into their organization. These schemes come and go even over a period of decades and more often than not end up breaking the banks of those whose eyes get bigger than their wallets when they start to ‘dream big’.

You can tell a lot of these reps are phonies when you look at their websites and see that they haven’t seen an MLM that they don’t like. They sell ALL of them because they can’t make it big in ANY of them. (Travel MLMs, Health MLMs, and more) Look at the vehicles that have the following on their rear windshield:

“If you aren’t making $800 a week call me!” Ever wonder why you never see this on an Audi, a Mercedes or even a Honda? They are painting their Pintos, Broncos and Ford SUV’s with this claim when in actuality, if they made that much, they wouldn’t be driving such a crappy vehicle in the first place. (Do you sense a little sarcasm here?)

Conclusion

Warning! These people are fakes, frauds and liars; following their guidance isn’t going to get you rich, independently wealthy or a better life, it will get you put in jail or in debt to the IRS. Remember the old axiom, ‘if it sounds too good to be true, it is.’ If you don’t believe me, feel free to contact the IRS criminal investigation division and ask them about this group. If they come calling on you, shut the door, hang up the phone and delete the spammy emails. You will thank me later.