• Jim Payne

My Tax Planning Rules

Tax planning is worth doing for any business owner who is making money. But, you must understand how far you should go with it. Here are my tax planning rules that I try to keep in mind whenever I am developing a tax plan.


  1. Articles purporting to have it all figured out, don’t. The tax law is too immense and complex for any one person to ever be sure that they have it figured out.

  2. Many times, the tax is cheaper than the cost of avoidance.

  3. Treating employees as contractors could bankrupt the company if the IRS wants to contest it.

  4. There is probably a government rule that makes your clever idea unworkable.

  5. Form over substance counts. Shareholder loans need to be documented to prove the intent was a loan.

  6. It’s not a plan without considering Alternative Minimum Tax (AMT).

  7. It’s not likely that you can get math right when doing it in your head.

  8. Pigs get fed. Hogs get slaughtered. Pushing every tax position to the brink will eventually result in resistance from an IRS auditor.

  9. If it’s on the IRS Recognized Abusive and Listed Transactions list – don’t do it.

  10. Use E-file or the US mail with a proof of mailing.

  11. Substantiation is a requirement in an audit. Your testimony as to what your expenses were will not get you very far.

  12. Audit risks are currently low, but that could change in as little as two years.

  13. Fighting the IRS is not the way to a happy life. They have far more resources than you and very little emotion invested in your audit. It’s better to avoid tangling with them or if an audit happens, to get them to go away as fast as possible. Any audit will take your focus off making your business work better and improving your quality of life.

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