Current Tax Scams
Tax Planning Schemes:
We are seeing an abundance of firms pop up out of nowhere. These firms are notoriously staffed with individuals who are not licensed by the IRS or with the state. These firms pop up promising to save you thousands of dollars, but they are charging you hundreds, if not thousands, of dollars to come up with this tax plan. They are trying to sell you on this whole plan.
Ideally, when working with a CPA firm or Tax office, you will pay a consultation rate and meet with the individual or team to discuss and formulate a plan that meets your needs. There is no fancy software to tell your CPA whether to restructure your taxes or what deductions you could qualify for. The only time your CPA or accountant should say, "I am going to follow up with you on the numbers," is when they are giving you exact figures on how much this change is going to save you in taxes.
Please do not fall victim to this service.
Cost Segregation Studies:
If you are investing in real estate and have a rental property, you should consult your CPA and appraiser on whether you should complete a cost segregation. The IRS Code is not written so that everyone qualifies as an active real estate investor. Not every rental property owner qualifies to take a 60K tax deduction in the first year. Not everyone is considered an active real estate investor. Before you go further into these steps and spend thousands of dollars on this service, ensure you are working with your accounting team and advisors to ensure you even qualify for this.
Cost Segregations Gone Bad-
The individual was a passive participant in the rental property and thus could not take the loss on the property.
The individual has to pay taxes on the deduction at the state level due to the state add-back and was not advised on this when he had the cost segregation done.
The individual paid for cost segregation, and the office did not prepare the change in accounting forms and mail them to the IRS (Most Common).
The firm preparing the cost segregation did not consider the prior depreciation that was deducted.
All this being said, cost segregation can help lower a tax bill. Please watch out for firms that overpromise and underdeliver, as they do not fully understand your tax situation.
Employee Retention Credit - Firms
The ERTC program was created when Congress passed the Spending Bills. This program was created to give small businesses that had to close their doors and change their hours to fit the new COVID regulations money to keep paying their employees.
What ended up happening is that large tech firms started popping up and would use this program to match small businesses with accountants. They would then take a commission of the tax credit you got back from the IRS.
By IRS guidelines- No tax preparer or anyone working with the IRS can take a commission of the tax refund. The IRS does not want tax professionals to be incentivized to apply for larger refunds fraudulently.
What to watch out for is if you are being charged a commission, then there is a good chance that your account is not being accurately reviewed by those professionals. Due to this, the IRS has currently paused the program while they start to take a more in-depth analysis.
We have filed for ERTC for our clients and had new clients come to us specifically for ERTC. We would charge them a flat rate fee per quarter qualified and that we amended the payroll taxes for. With this, our fees did not differ from our normal tax prep and filing fees that our clients pay. We also ensured that we did our analysis and back-work to make sure that they qualified.