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September is here.
The kids are back in school. Summer vacations are winding down. Pumpkin spice is beginning its annual invasion of absolutely everything.
And somewhere, at a Labor Day cookout, someone is explaining tax law with complete confidence and absolutely no qualifications whatsoever, other than the confidence-building tequila that they are imbibing in.
You know the person.
“My accountant told me…”
“My cousin owns a business and he says…”
“I saw a video about this…”
"I asked AI and it told me what to do"
Or perhaps the most terrifying sentence a tax professional can hear:
“TikTok says you can deduct it.”
So, this month, instead of reminding you to organize your receipts, review your finances, or start preparing for tax season- we've done enough of that lately- we thought we'd perform a little public service.
Here are a few pieces of tax advice you should probably stop taking.
“A bigger refund means my accountant did a better job.”
Not necessarily.
Your tax refund isn't a prize the IRS gives you for making it through another year. In most cases, it's simply your own money coming back because you paid in more than you owed.
Getting a $10,000 refund can certainly feel wonderful.
But if you overpaid by $10,000 throughout the year, you essentially gave the government an interest-free loan.
They're grateful.
We're sure they'll send a thank-you note any day now.
“I have an LLC, so I can deduct everything.”
There seems to be a popular belief that adding the letters LLC after your business name unlocks a secret level of the tax code where dinners, vacations, cars, clothing, and possibly the family dog suddenly become deductible.
Unfortunately, no.
Business expenses still need to meet the rules for deductibility. Creating an LLC doesn't magically transform personal spending into business spending.
Although we admire the optimism.
“If I didn't get a 1099, I don't have to report the income.”
This one has been around forever.
Whether someone sends you a tax form doesn't determine whether income is taxable.
If you earned taxable income, you're generally required to report it.
“But they didn't send me anything!”
We understand, but the IRS says otherwise.
“I put my company logo on my car, so now the whole car is deductible.”
Putting your company name on the side of your vehicle can be great advertising.
It does not, however, cause the IRS to declare everything that vehicle does from that moment forward a business activity.
Driving to a client? Possibly business.
Driving to the office? Different rules may apply.
Driving to Cape Cod for the weekend with bicycles strapped to the roof?
The magnetic sign on the door isn't going to save you.
“Cash doesn't count.”
Oh, it counts.
We don't know who started this rumor, but they've certainly had an impressive career.
Cash income is still income.
The fact that there wasn't a credit card involved doesn't cause the transaction to disappear into some mysterious accounting Bermuda Triangle.
“My neighbor deducts it.”
Wonderful.
Your neighbor also may be doing it wrong.
One of the more interesting things about tax advice is that people will sometimes confidently recommend a deduction they've been taking for years simply because they haven't been caught yet.
That's not quite the same thing as the deduction being legitimate.
“If there's a problem, I'll just tell the IRS my accountant did it.”
This strategy may not work quite as well as you hope.
Your tax professional prepares your return based on the information you provide. Ultimately, you are responsible for reviewing your return and providing complete and accurate information.
That's one reason working with a qualified tax professional matters.
It's also why leaving out that “little side business” you forgot to mention isn't legal. Then, if your current tax professional finds this out in March, you will probably be scrambling to find a new preparer in March to prepare your taxes, and this won't be of your choosing. Good luck with that!
Your tax professional can't report what they don't know about.
“I saw it online, so it must be true.”
Ah, yes.
The internet.
Home of cat videos, conspiracy theories, people arguing with complete strangers, and an astonishing number of self-appointed tax experts.
There is plenty of excellent financial and tax information online.
There's also plenty of nonsense.
The problem is that both can be presented by someone staring confidently into a camera.
Before you restructure your business, buy a vehicle, hire your children, open seventeen LLCs, or attempt some exciting new “tax loophole,” give us a call.
We'd much rather answer the question before you do it.
And Finally: Beware of Tax Advice Served With Potato Salad
September means Labor Day cookouts, football, back-to-school activities, and plenty of opportunities to receive unsolicited financial advice.
So remember:
Your brother-in-law may be a wonderful guy.
Your neighbor may run a very successful business.
Your friend may have watched a lot of YouTube videos.
The person on TikTok may have 2.7 million followers.
And the person doing strange—and occasionally surprisingly intimate—things on the internet may have a link in their bio inviting you to a webinar on business strategy, wealth building, or “tax secrets the IRS doesn't want you to know.”
We're not judging anyone's career choices.
We're just suggesting that perhaps tax advice shouldn't be one of their side hustles.
None of these things automatically make someone a tax professional.
When you're making decisions that could affect your taxes, your business, or your money, ask someone who actually deals with this stuff for a living.
Preferably before you buy the $90,000 truck because somebody at a barbecue told you it's “basically free because it's a write-off.”
It isn't.
Sorry.
Have a great September.
And if someone at the Labor Day cookout starts explaining the tax code to you (and you can tell that they’re four margaritas in)…
maybe just get another helping of potato salad.
It Figures Tax Services
We take the pain out of a taxing situation.
— [Scott Alving, EA]
Business Owner & Professional Tax Whisperer
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