George Kamel Reacts To the Worst Online Tax Advice

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According to an IRS news release, the IRS has penalized American taxpayers over $162 million for falsely claiming tax credits, which they often learned about online. Over the last few years, it’s especially become common to fall for misleading tax advice shared by social media influencers and scammers, so fact-checking is crucial to avoid surprise bills and potential legal trouble.

In a YouTube video, money expert George Kamel spoke with tax attorney Jasmine DiLucci about the legitimacy of several questionable tax tips circulating online. Below are some schemes to avoid since they can land you in serious trouble.

Also here are tax loopholes the rich use to pay less.

Overseas Zero Tax Strategy

Kamel played a video of someone from the United Kingdom who claimed it’s possible to legally avoid income taxes by moving around to different countries, such as Dubai. But DiLucci explained that it’s crucial to know the tax laws associated with where you’re a resident and where you visit.

If you’re from the U.S., you have to report income earned elsewhere, regardless of whether the country you visited has taxed you on it. Trying to hide it would make you guilty of tax evasion. However, the IRS noted that the foreign earned income exclusion can provide a tax break.

Misunderstanding of Tax Brackets

A popular online claim is that receiving a raise or making more money in general means you’ll see less of it due to higher taxation. Kamel and DiLucci debunked this myth, which reflects a misunderstanding of the U.S. progressive tax system with its brackets and rates.

For example, if your raise moves you from the 12% to 22% tax bracket, only the excess income amount that falls into the new bracket would be taxed at the 22% rate. Your previous layers of income will still be taxed at the lower 10% and 12% rates accordingly. 

Illegitimate Business Deductions

Kamel and DiLucci reacted to videos with claims that you can generously write off personal expenses if you can come up with some connection to your business. Bibles, mattresses, contact lenses, shoes and personal lunches were among the examples discussed. 

But before you try justifying a questionable business deduction, keep in mind the IRS’s “ordinary and reasonable” requirement and ask a tax professional for their opinion.

“In general, a lot of these personal items that we try to turn into business items, they can have some level of a business purpose and not be a business deduction,” DiLucci explained.

Crypto Trust Tax Scheme

Another online video claimed you could use a special trust for your crypto and indefinitely avoid paying taxes on the gains. It also promoted help from legal and tax professionals. 

DiLucci said that this claim likely referred to spendthrift trusts, which are sometimes misused to partake in tax fraud. She explained that this crypto scheme doesn’t allow you to skip out on taxes and pointed out how the language and terms used in such videos can be a red flag.

“So the more words, the more illegal it becomes,” Kamel added.

Form W-4T for Tax Exemption

A tax protest video claimed that taxes aren’t a legal requirement and that you can use Form W-4T, which actually isn’t a real IRS document, to opt out of paying them. It also suggested ignoring IRS letters that arrive after mailing in this tax form.

DiLucci explained that this poster’s advice is fraudulent and can land you in jail, so it’s wiser to pay your taxes regardless of your opinion about them. However, you can legally update your real Form W-4 at work to help prevent having too little or too much income tax withheld from your pay.

Misconceptions About the Section 179 Deduction

Another video claimed it was financially smart to buy certain vehicles because the Section 179 deduction would allow you to write off the whole amount in the first year rather than follow the standard depreciation method. It cited the over 6,000-pound weight rule, which is further detailed in IRS Publication 946.

While this is a legitimate deduction if you use your vehicle for business purposes over half of the time, DiLucci addressed some key requirements. First, the weight threshold can be for an unloaded or loaded vehicle, depending on its type, so the vehicle you want may not qualify. Plus, there are deduction limits to consider, so you may not get the full amount in year one.

“And you probably still have a huge car loan attached to that because most people doing this crap have to take out a giant car loan to make it happen, which then has its own interest,” Kamel added.

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