Hi there,

As the East Coast begins to embrace the chill, it's clear that in the world of business, things are just starting to heat up. Dive in with us for three scorching strategies to warm up your success this autumn.

Stop Trying to Make Being a Sovereign Citizen Happen, It’s Never Going to Happen.

There’s something I see a lot on social media regarding tax - and it’s about people thinking they’re not committing tax fraud when in reality, they just haven’t been caught.

There was yet again, one of these folks on TikTok who went viral claiming she just doesn’t need to pay taxes because she wrote a letter to the IRS informing them of such based on her location (she printed and sent in Google Maps so they knew in the US where she lived) along with a W-8BEN. She also said she gave the IRS 30 days to respond, so since they didn’t - she’s assuming she’s correct and can just, you know, not pay taxes.

Also - if she thinks an W-8BEN is what you give to the IRS to tell them you’re not subject to taxes - she’s wrong. This is a form given to your employer or the person paying you letting them know you’re not subject to tax withholding. This isn’t a form you send into the IRS.

The IRS does not play around when it comes to these boneheads - and there is a plethora of case-law to back up how they rule in these instances.

IRS Business vs Hobby Loss Rules.

I stumped across this tweet the other week:

Can he write off those surf expenses?

You’re going to love my answer - it depends.

There are two different angles to consider here:

1) is this truly a business or just a hobby? and,

2) are these expenses he’s incurring ordinary and necessary?

For the first one - the IRS has 9 different factors it considers when making this determination on whether an activity is a hobby or constitutes income. Most of the key factors revolve around the profitability of the business and the profit motive. If you can’t prove it’s a business and is actually a hobby you make some income on, you cannot take any of the deductions against your income, and you income must be claimed. That’s what we call a lose-lose.

If you have proven that your endeavor is truly a business, then you can only expense ordinary AND necessary items against your income.

For it to be ordinary - ask yourself, would a 100 other people doing this same business activity as me also incur this expense? If yes - it’s probably ordinary for your industry.

For it to be necessary - ask yourself, do I need to spend this money to make income or produce the product/service I’m selling? If yes, then it’s necessary for your business.

And remember - BOTH of those things have to be true, it can’t just be ordinary, and it can’t just be necessary.

IRS to Millionaires: Winter is Coming.

Researchers with the IRS and economists did a study and estimated that the top 1% of taxpayers are underreporting their taxes by 20%. That is what we in the accounting world call a “material” amount.

The IRS is gearing up to go after 1,600 millionaires and 75 large partnerships in an effort to collect taxes due - and credit this initiative to boosted funding and the use of AI.

This comes on the heels of the IRS in July announcing it had collected $138M in additional taxes owed for high-earners.