How to Rip Off the IRS - Grant Cardone's advice... Legit?

[Timothy Metra]

Opinions on Grant Cardone aside (I personally have mixed feelings), he had a podcast titled "How to Rip off the IRS" that I listened to today. I'll list what he said to always do below and my concerns.

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1.)

Claim: Every person should be taking 9 exemptions. He said that it doesn't matter whether you have 9 kids or not. Doesn't matter if you're 18 or 88 years old... 9 exemptions. He says, "Everyone should do it. It's legal, it's alright."

Concern: I'm fairly sure if you have to provide a SSN for each child when filing. I'm single with no kids, so this isn't something I'm familiar with.

2.)

Claim: Create a business entity and operate from your home. Have one of your rooms set up as an office, and claim half your office as a business expense. He used a co-worker as an example. She pays $1,550 in rent. He said to make an office out of one room, pay a membership for network marketing and say that's your business, then claim about $400 a month towards that office space. He also did say to make some attempt to sell items and whatnot, but that it's good to pay $1,000 towards the "business" and be able to claim $8,000 on taxes).

Concern: I honestly hate the IRS myself, but this seems borderline fraud. I honestly don't care about the ethics of it though, as long as it's legal. I'm okay with not paying more in taxes than I have to.

3.)

Claim: Lease a car. He says this over and over throughout the show, claiming that if you lease a car, you can claim 100% of the payments on your taxes at the end of the year. If you pay $400 a month for the car, write off $4,800 at the end of the year for it.

Concern: Not using the car for 100% business purposes. Since he's in real estate and doing deals literally everywhere, he claims all of his vehicle payments. Even said to go out and get a Lexus if you want.

4.)

Claim: No refunds. He doesn't elaborate on this too heavily, just kind of talks in circles about "the federal government gets it before you" and "don't overpay the IRS".

Concern: Owing a lot more than expected at the end of the year.

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There were some other points I'm sure I missed. Listened to it today at work, but you can find the podcast on iTunes. It's episode 240.

Like I said, I'm completely fine with approaching these strategies if legal. And yes, I will contact a CPA before actually doing so. But I'd like to know your opinion.

ALSO, I'm planning on starting an LLC within the next month, so all my operating expenses would be claimed through this and kept a record of through a business checking account. I'm not only operating the LLC for tax advantages, though. I'm looking to actually do my investments through it.

Does anyone care to comment? Please do.

[Jim Kennedy]

@Timothy Metra I worked in the Criminal Investigation Division of the IRS. I now own a CPA firm (a business) and my wife and I run a huy-and-hold business. Notice that we run both fo these businesses with the intent of making a profit (more on that in a few more sentences) The fact is you can TRY and deduct ANYTHING you want, but if you cant substantiate it in an audit, you will be in big trouble. I would never sign a return with this kind of aggressive borderline fraud. One of the biggest factors at the IRS  is whats known as "taxpayer intent" Open a business and show no gross revenue? Taxpayer intent is not to have a profit. It is to misrepresent the purpose of the business. Here are my comments on the items you listed:

• 1.If he is suggesting what I think, then this can be done. If he is saying to claim that many dependency exemptions on your W4, its ok. It just tells the withholding tables how many mouths you are feeding, and tax is withheld accordingly. More mouths: less withholding. All it does is result in the lowest amount of Fed w/h check after check. That means you get more net pay up front, but you may end up paying serious amounts come filing time, along with underpayment penalties and interest.
• 2.That’s a fraud. Theres no intent to generate business income. A business by IRS standards is not a hobby if it has a for profit motive, does advertising, has necessary expenses and shows income or attempts at making income. If you say it’s a business and you know its not, that’s fraud – “a willfull misrepresentation”. And then you sign the affidavit that everything is true and correct as far as you know and its not: That’s perjury, and against the IRS, a government entity: that’s a felony offense.
• 3.Need to have a documented mileage log to sunstantiate it under audit. Plus if its used in the sham business, see previous comment.
• 4.This is the result of #1 – see above. 

The IRS assigns a rating to your return called a DIF score which is used in determining what returns will get selected for score. What this guy is suggesting would blow the DIF score thru the roof.

There are other CPA's on BP besides me. Even though I seem to have more buy and hold and IRS experience then others here, I seriously believe that none of the CPA's or tax preparers on this very page would pull any kind of stunts like the podcaster suggests, and all their work is of honest intent to pay the lowest legal amount of tax. Even if BP members don't come to me, I would rather see them go to another legitimate candidate than to do this kind of risky stuff.

Jim Kennedy, CPA