You Can Reduce Your Business Taxes with Conservative Leveraging Strategies

Posted on September 23, 2013 by Bill Faiferlick

Bill Faiferlick Tax Reduction LeverageMost people are unfamiliar with the opportunity to leverage the tax system in a conservative, legally compliant way that yields incredible benefits for business owners and professionals.

We’re all familiar with traditional retirement planning like 401(k)s. However beneficial this type of plan may be for the rank and file employee, it falls short of any true deferral and tax savings opportunities for owners or the highly compensated. These plans were meant to provide benefits for employees and some small deferral and tax savings for the business owner.

Many business owners, due to the lack of other reasonable options, still try to use a shoe horn to fit themselves into these plans getting some minimal tax deduction and savings for themselves.

But this doesn’t have to be!

There are opportunities today intentionally created by Congress as far back as 2000. These are hybrid or carve-out pension plans that can go a long way in providing both the size of meaningful tax savings and accumulations that will amount to easily another few million dollars in 5 years. I’m referring to plans that exceed the conventional retirement planning options.

As we look at this incredible wealth creating opportunity, I want to make sure you understand the difference between tax avoidance and tax evasion if that is a concern for you. There are some clearly defined differences. There is nothing illegal about using effective tax strategies to protect and retain your hard earned income especially with a government that is intent on taxing you at the highest level. And that level is increasing as we speak.

Due to harsher and more punitive penalties being imposed by the IRS, individuals lose sight of the important difference involving legitimate tax planning for tax avoidance purposes and tax evasion. There seems to be a panic and fear of using legitimate means to avoid or reduce taxes, however, the IRS has clearly defined the difference in law between avoidance and evasion.

The Difference Between Tax Avoidance and Tax Evasion According to the IRS Internal Revenue Manual, Section 9.1: 3.3.2.1 (07-29-1998)

Avoidance of taxes is not a criminal offense. Any attempt to reduce, avoid, minimize, or alleviate taxes by legitimate means is permissible. The distinction between avoidance and evasion is fine, yet definite. One who avoids tax does not conceal or misrepresent. He shapes events to reduce or eliminate tax liability and, upon the happening of the events, makes a complete disclosure. Evasion, on the other hand, involves deceit, subterfuge, camouflage, concealment, some attempt to color or obscure events, or makes things seem other than they are. A simple example, the creation of a bona fide partnership to reduce the tax liability of a business by dividing the income among several individual partners is tax avoidance. However, the facts of a particular case may show that an alleged partnership was not, in fact, established and that one or more of the alleged partners secretly returned his or her share of the profits to the real owner of the business, who, in turn, did not report this income. This would be an instance of attempted evasion.

The IRS continues to change legislation to prevent Americans from acquiring and maintaining their wealth through increasing taxation using intimidation and fear as their first line of enforcement.

The current administration seems preoccupied with taxing those taxpayers who are essential to economic growth in the U.S., businesses and professionals, utilizing whatever means they have at their disposal including the passage of progressively more punitive tax laws.

It is always easier to tax the wealthy – those having incomes of $250,000 a year or more.

The alternative is to simply lay your wallet on the table and let the government tell you how much you can keep. As the IRS becomes aware of more opportunities to increase their coffers, laws have and will continue to change reducing the options available to create and preserve wealth and reduce taxes.