How To Beat The IRS At Its Own Game

According to Commerce Secretary Howard Lutnick, the Trump administration is considering a proposal to eliminate federal income taxes for Americans earning less than $150,000 a year.

Trump himself has called for “no tax on tips, no tax on overtime, and no tax on Social Security benefits for our great seniors.”

And, with a Republican-led White House and Congress, policymakers look set to preserve the majority of the key provisions from the 2017 Tax Cuts and Jobs Act (TCJA).

But of course, simply saying something doesn’t make it so and for now, for most of us, tax season is here and Uncle Sam wants what’s due.

The IRS tax code is one of the densest, most complex, most incomprehensible set of rules known to man and the onus is on you to ensure that your every 1 and 0 is in the right place… mess up, and the IRS could come down on you like a ton of bricks.

Plus, this year filing may prove trickier still.

Last month, the IRS fired 7,000 employees and plans are in the works to slash its remaining workforce of 90,000 in half through layoffs, incentivized buyouts, and attrition (a hiring freeze).

Among those facing big cuts are workers at the Taxpayer Advocate Service—the sector responsible for helping those facing financial or other tax-related issues as well as victims of identity theft—and the Taxpayer Experience Office which is responsible for identifying problem areas in taxpayer-facing processes before they harm taxpayers.

Direct File could also be under threat. Introduced as a pilot program last year, it’s now available in 25 states and allows taxpayers to electronically file their federal taxes for free directly on the IRS website. However, it’s set to lay off 30% of its staff by mid-May.

Now, I’m sure few among us will lose much sleep over a few thousand less IRS agents roaming through our bank statements…

But the fact remains, for now at least, if you are an American, there is simply no way to escape the IRS—no matter where you live in the world.

You do not want to be audited and found wanting.

And here’s the thing: The IRS may seem scary… but you don’t need to be afraid of them.

I don’t mind telling you, my tax affairs are complex. I’ve obtained multiple overseas residencies, I own property in several different countries, and I run a successful business incorporated outside the United States.

I could be an IRS target…

I may even get audited, but I’m not worried about it.

I know how to speak to the IRS. In fact, I was an Enrolled Agent for a brief period.

An Enrolled Agent isn’t an IRS auditor, but someone who passes a test given by the IRS that allows them to represent taxpayers in Tax Court. CPAs and attorneys are allowed as well.

So, I know how to talk to the IRS… especially about my personal taxes.

My message every tax-filing season is simple: You have to know how to beat the IRS at its own game.

That labyrinthine set of rules… All those different deductions and credits and form after form after form… If you know how to play the game, it’s a set of instructions for never paying a cent more than you have to.

That’s why I’m not worried about IRS audits…

Because I know the rules of the game, and I know how to use the IRS’s own tactics to ensure the IRS never gets more of my money than the minimum it is legally entitled to.

For me, this is not only fulfilling my legal obligation, but also my moral one.

The way I see it, I am morally bound to look after my family and the people and causes I care about… and I don’t owe the government one cent more than it’s entitled to.

Stay diversified,

Lief Simon
Editor, Offshore Living Letter