Tax Season Is Here: Here’s How To Beat The IRS At Its Own Game
'Tis The Season
‘Tis the season.
Don’t worry—I’m not confused about what time of year it is.
I’m sure you’re not quite ready for another round of Christmas and New Year’s promotions just yet…
No, it’s that other exciting time of year…
I’m talking about tax season.
OK, it may be an exciting time for the IRS. Not so much for the rest of us.
The taxman is excited because he finally gets his hands on hardworking Americans’ money.
For us mere mortals, filing our return is just something we have to get through.
Taxes have been in the news recently, and not just because it’s that time of year…
If you were following developments from the meeting of the global elite at the World Economic Forum in Davos, Switzerland, this month, you may have seen headlines like this one from the U.K.’s Guardian newspaper:
“‘Tax Us Now’: Ultra-Rich Call On Governments To Introduce Wealth Taxes”
Some “ultra-rich”—including famous actors and a Disney heiress—are demanding that governments bring in higher taxes to tackle income inequality.
Warren Buffett has been saying this for years.
The thing is, if the billionaires of the world really are so keen for the taxman to have more cash, they can simply send the IRS a check.
But they don’t do that. Instead, they want governments to tell them what to do. They’re literally begging the bureaucrats to assume more control over the global financial system. It’s a strange thing.
But, if we’ve learned anything from the past few years, and the experience of Covid-19, it’s that some people are all-too-eager to be told what to do by the government—and more than willing to accept increased government control over all aspects of their lives.
The rest of us, however, just want to live the way we always have without worrying about being “cancelled”… And keep as much of our hard-earned money as we can…
Which brings me back to tax season.
A New IRS Threat?
Is it going to be harder than ever for the Average Joe to keep more of his hard-won cash this year?
That non-average Joe… the one in the White House… wants to empower the IRS to go after American taxpayers, to make sure we’re paying every last cent the federal powers-that-be demand.
Last year’s so-called Inflation Reduction Act (IRA) includes a provision for an additional 87,000 IRS agents to audit tax returns.
(Side note: The Inflation “Reduction” Act pumps literally hundreds of billions of government dollars into the economy… which used to be the very definition of “inflation”—i.e. government “inflating” the economy by pumping in extra money, leading to price rises… But I guess this is just another word that doesn’t mean what it used to. Go figure.)
What’s my take on the 87,000 new IRS agents?
Well, The Wall Street Journal reports that accountants—the people who become IRS auditors—are leaving the profession in droves. More than 300,000 U.S. accountants have quit in the last two years.
According to the quitters interviewed by the Journal, being an accountant is boring, and it pays less than other jobs with the same long hours. (Actually, accounting can be interesting, it’s usually the accountants who are boring.)
Young people, even accounting graduates, don’t want to do it.
If you think being an accountant in private practice is boring… try working for the government.
So, color me skeptical that the IRS will actually be able to beef itself up in the way that the government dreams.
Does that mean you should be complacent about filling out your tax return and getting all the details just right?
This won’t come as news to you…
The IRS tax code is one of the densest, most complex, most labyrinthine, most incomprehensible sets of rules known to man.
And you have to make sure that your every 1 and 0 is in the right place, or the IRS could come down on you like a ton of bricks.
You do not want to be audited… and be found wanting.
And, regardless of how many auditors the IRS has at its disposal, it is a simple fact that the more money you make, the more likely you are to face an audit.
As you get richer—the IRS becomes more and more likely to train their eyes on you.
And let me state up front… because, after all, you are reading a newsletter about going offshore… If you are an American, there is simply no way to escape the IRS.
No matter where you live in the world, U.S. citizens are required to file U.S. tax returns every year.
But here’s the thing: The IRS is big, bad, and scary… But you don’t have to be afraid of the IRS.
I don’t mind telling you: My tax affairs are complex. I’ve obtained multiple overseas residencies, I own property in several different countries, and I run a successful business incorporated outside the United States.
I could be an IRS target…
I may get audited, but I’m not scared of it.
I know how to speak to the IRS. In fact, I was an Enrolled Agent for a brief period.
An Enrolled Agent isn’t an IRS auditor, but someone who passes a test given by the IRS that allows them to represent taxpayers in Tax Court. CPAs and attorneys are allowed as well.
So, I know how to talk to the IRS… especially about my personal taxes.
My message every tax-filing season is simple: You have to know how to beat the IRS at its own game.
That labyrinthine set of rules… All those different deductions and credits and form after form after form… If you know how to play the game, it’s a set of instructions for never paying a cent more than you have to.
That’s why I’m not worried about IRS audits… even if the IRS gets 87,000 new auditors.
Because I know the rules of the game, and I know how to use the IRS’s own tactics to ensure the IRS never gets more of my money than the minimum it is legally entitled to.
Forgive me, but, for me, this is not only fulfilling my legal obligation, but also my moral one.
I am morally bound to look after my family and the people and causes I care about… and I don’t owe the government even a little bit more than it’s entitled to.
There are strategies that Americans overseas can use to minimize or even wipe out entirely their U.S. tax bill…
I’ll be writing you again this Thursday, and I’ll share three of those strategies.
Now… Isn’t that a reason to get excited about the season?