If you've landed on this article out of the blue, you might want to first read How to Lower My Taxes By Delaying Revenues, How to Lower My Taxes By Increasing Expenses and More End of Year Tax Tips to Achieve Lower Taxes.
Those articles cover legitimate, time-tested and legal ways to lower income taxes. This article on the other hand purposely steps over the line to look at some very aggressive tax management strategies that are interesting and creative…yet could be, and probably are, completely illegal.
If you end up in jail for tax fraud, don't blame us. Seriously, this is not tax advice. This is just us thinking out loud.
Creative Ideas for Lowering Taxes
We're not CPAs here, and we never have engaged in any financial shenanigans. But we do like to brainstorm about how others might be gaming the system, just for fun.
Can you do these things and get away with it? Probably not.
Buy and Return
Let's say I'm a small business owner. What stops me from going out shopping on December 15 and putting $20,000 in business expenses on my business credit card. I then pay the $20,000 balance off on the credit card on December 31. See what's going on? I just lowered my business profits by $20,000 and, as a result, lowered my taxes for the year.
On January 5, I walk back into the stores where I bought the $20,000 worth of stuff and I ask for a full refund, which is credited back to my account. During the course of the next year, I deplete the credit by buying necessary business expenses.
In effect, I've shifted next year's expenses to this year, but have done so for ambiguous, fictitious and basically non-existent expenses.
Legal? Probably not.
Other Half-Baked Ways to Save on Taxes
We've got some other crazy ideas on how to game the system, but we'll spare you.
For the record, while it's fun to think about these ideas, we never cross the line from fantasy to reality on this stuff. In fact, we're probably about as conservative on taxes as can be. (Translation? Please don't audit us just because we wrote this article!)
Seriously, when it comes to managing taxes, if it sounds too good to be true, it is.
Be very wary of overly aggressive tax management strategies, and whatever you do, don't develop a tax strategy based on something you read on a website.
Talk to an expert and get some sage counsel from people who really know what they are talking about.