IRS audit

Business Tax Avoidance Schemes

Businesses, especially home based businesses, are often victims of business tax avoidance schemes. Below are some facts about taxation of home based businesses and how to recognize business tax avoidance schemes. The IRS do not want businesses to fall for tax avoidance schemes because the IRS would rather collect taxes legally than having to crack down illegal business tax avoidance schemes and college penalties plus interests. Many home based businesses that fall for tax avoidance schemes are not even aware that they are victims of these schemes until the IRS audits them.

Business tax deductions are often capitalized in tax avoidance schemes

For a business or home based business to be able to deduct expenses related to business use of the business owner's home, the owner must carry on a bona fide business in addition to meeting other home use of business criteria. Tax deductions for the business use of home may be limited.

Qualifications for tax deduction for business use of home

For a home to be used for business, the business part of the home must be:

  • exclusive
  • regular, and
  • for the business

and the business part of the home must be one of the followings:

  • principal place of business
  • place where the owner meets with customers in the normal course of business, or
  • a separate structure used in connection with the business
What are home based business tax avoidance schemes?

Business tax avoidance scammers often do the followings:

  • promise taxpayers that they can reduce the amounts of taxes they pay the IRS
  • sell packages for tax avoidance or IRS audit assistance
  • advice taxpayers that they can deduct all or most of their home and other personal assets as business expenses.