Financial Advisors React to Horrible Tax Advice on TikTok

Summary

Money Guy Show: Detailed Summary of "Financial Advisors React to Horrible Tax Advice on TikTok"

Release Date: November 15, 2024

Hosts: Brian Preston and Bo Hanson
Podcast Title: Money Guy Show
Episode Title: Financial Advisors React to Horrible Tax Advice on TikTok

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Introduction

In the episode titled "Financial Advisors React to Horrible Tax Advice on TikTok," hosts Brian Preston and Bo Hanson delve into the murky waters of questionable tax advice proliferating on social media platforms like TikTok. Recognizing the surge of misleading financial tips online, the duo aims to dissect and debunk these dubious claims, providing listeners with grounded, expert insights to safeguard their financial well-being.

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Reaction to Bad Tax Advice on TikTok

The episode revolves around the hosts reacting to various snippets of tax advice they encountered on TikTok. These clips often promote aggressive tax avoidance strategies that border on illegality. Brian and Bo meticulously analyze each piece, highlighting the potential pitfalls and legal ramifications.

a. Leasing Luxury Vehicles as Business Expenses

One of the TikTok videos features an individual advocating for leasing expensive vehicles to maximize tax deductions:

• Timestamp [01:07]:
  Unknown Speaker: "There's only one car you buy and the rest you lease. 150,000 Range Rover. It weighs 6,000 pounds. Section 179, IRS says anything over 6,000 pounds you can write off 100%."

• Brian's Analysis [01:21 - 02:43]:
  Brian acknowledges the accuracy of the IRS provision that allows businesses to write off vehicles over 6,000 pounds through Section 179. However, he emphasizes the complexities involved, such as meticulous mileage tracking and the necessity of maintaining a business-use percentage exceeding 50%. He warns that without stringent adherence, such deductions can backfire, especially for small business owners who might not meet the required criteria.

b. Snitching on Tax Evaders

Another disturbing piece of advice involves encouraging listeners to report tax evaders:

• Unknown Speaker [03:16 - 03:37]:
  Unknown Speaker: "Snitch on someone for not paying their taxes. You get 30% of whatever they owe."

• Bo and Brian's Response [03:37 - 04:45]:
  Bo dismisses the suggestion as ill-advised, noting the potential legal and ethical implications of acting as a whistleblower without legitimate grounds. Brian echoes this sentiment, cautioning listeners about the seriousness of making unfounded accusations and the potential legal consequences of such actions.

c. Mastermind Events as Deductibles

The episode continues with advice on hosting "mastermind events" to claim tax deductions:

• Unknown Speaker [04:45 - 05:12]:
  Unknown Speaker: "Throw a mastermind event instead. Masterminds are tax deductible."

• Hosts' Evaluation [05:12 - 07:21]:
  Brian and Bo dissect this claim, acknowledging that while legitimate business gatherings with clear agendas can qualify for deductions, the mere rebranding of social or personal events as "masterminds" is misleading. They stress the importance of ensuring that deductible events are genuinely business-related, with documented purposes and outcomes, rather than informal social gatherings masquerading as financial strategies.

d. Offshore Tax Avoidance Schemes

A segment of the podcast addresses advice promoting offshore tax evasion:

• Unknown Speaker [07:21 - 12:30]:
  Unknown Speaker:

  • "I work for your trust. When you set up your trust, you transfer your intellectual property into the trust. So all the money your company generates with your intellectual property has to go back to the trust. And because we set up your trust in Cyprus, you don't have to pay any income tax, inheritance tax."

• Hosts' Critique [12:30 - 14:26]:
  Brian highlights the illegality of such schemes, particularly for U.S. citizens required to report global income. Bo expresses skepticism about the feasibility and risks associated with relocating for tax purposes, emphasizing that the IRS scrutinizes offshore accounts rigorously. They caution against falling for "too good to be true" tax strategies that can lead to severe penalties, including criminal charges.

e. Gambling Losses as Tax Write-offs

Lastly, the podcast touches upon the misconception surrounding gambling losses:

• Unknown Speaker [14:26 - 15:54]:
  Unknown Speaker:

  • "Tax tip Tuesday. Don't forget, gambling losses are a tax write off. Every day for lunch I come out."

• Hosts' Clarification [15:11 - 15:54]:
  Brian clarifies that while gambling losses can offset gambling winnings, they cannot be indiscriminately used to reduce ordinary income taxes. He explains that precise documentation and a clear relationship between losses and winnings are essential for legitimate claims, debunking the myth that one can simply accumulate losing tickets to eliminate tax liabilities.

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Analysis and Insights from Hosts

Throughout the episode, Brian and Bo provide valuable insights into distinguishing between legitimate tax avoidance and illegal tax evasion. They emphasize the importance of understanding IRS regulations and the potential consequences of misapplying tax laws.

a. Proper vs. Improper Tax Deductions

The hosts underline that while the tax code offers various deductions and incentives, exploiting loopholes without genuine business purposes is perilous. They stress the necessity of maintaining accurate records, ensuring business-relatedness, and consulting qualified professionals when considering significant tax strategies.

b. The Danger of Following Unqualified Advice

Brian and Bo caution listeners against taking financial advice from unverified sources on social media. They highlight the prevalence of misinformation and the sophistication with which some misleading strategies are presented, making it imperative to seek counsel from certified financial advisors or tax professionals.

c. Encouraging Legal Tax Avoidance vs. Tax Evasion

The distinction between legally minimizing tax liabilities and engaging in fraudulent activities is a recurring theme. The hosts advocate for lawful tax planning — leveraging available deductions and credits within the boundaries of the law — while vehemently opposing tax evasion tactics that involve deceit or concealment.

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Conclusions

In wrapping up the episode, Brian and Bo reinforce several critical takeaways for their audience:

1. Seek Qualified Advice:
   Always consult with certified financial advisors or tax professionals before implementing significant tax strategies.

2. Understand the Law:
   Fully comprehend the IRS regulations related to deductions and credits to ensure compliance and avoid unintended legal issues.

3. Be Skeptical of Social Media Tips:
   Approach tax advice from platforms like TikTok with caution, recognizing that not all information is accurate or beneficial.

4. Prioritize Legitimate Financial Practices:
   Focus on sustainable and lawful financial practices that contribute to long-term wealth building without risking legal repercussions.

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Notable Quotes with Timestamps:

• Unknown Speaker on Vehicle Leasing [01:07]:
  "There's only one car you buy and the rest you lease. 150,000 Range Rover. It weighs 6,000 pounds. Section 179, IRS says anything over 6,000 pounds you can write off 100%."

• Unknown Speaker on Snitching [03:37]:
  "Snitch on someone for not paying their taxes. You get 30% of whatever they owe."

• Unknown Speaker on Mastermind Events [04:45]:
  "Throw a mastermind event instead. Masterminds are tax deductible."

• Unknown Speaker on Offshore Schemes [11:22]:
  "I can go to Dubai, clean 50 million, be left with 50 million."

• Unknown Speaker on Gambling Losses [14:26]:
  "Tax tip Tuesday. Don't forget, gambling losses are a tax write off."

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Final Thoughts

"Financial Advisors React to Horrible Tax Advice on TikTok" serves as a crucial reminder of the importance of discerning credible financial guidance from misleading or fraudulent tips circulating online. Brian Preston and Bo Hanson adeptly navigate through each questionable strategy, providing clarity and professional advice to empower listeners in making informed financial decisions. Their commitment to fostering financial literacy and integrity underscores the essence of the Money Guy Show's mission to bring confidence to wealth building through simplified and trustworthy strategies.

Transcript

[Brian Preston]

Hey, podcast family, you have to know we are known kind of on the YouTube world as the react channel. That's right. Yep. The Money Guy show. But we don't want you to miss out on any of the fun. So we have something special for you today.

[Bo Hanson]

We are so excited. We are going to actually release for you the same audio that we do on our react videos. Now, if you've not checked out the react videos, go to YouTube.com moneyguyshow and check them out. But if you just want to know what we're getting into from the audio side, make sure you listen up.

[Brian Preston]

This could be fun.

[Grant]

So I accidentally put my lunch and my margarita on my business card, which means now I have to make it a tax reform.

[Brian Preston]

Oh my gosh.

[Grant]

That's what this video is for.

[Brian Preston]

Hey, hey, hey. It's Brian and Bo from the Money Guy show. The team has put together some tax videos, but I'll be honest, we did get out of them. It's not necessarily good stuff.

[Bo Hanson]

Brian, I am so excited because I love that we can speak into what's good and what's not out there on the Internet to help you do money better. So with that, let's dive in.

[Unknown]

There's only one car you buy and the rest you lease. 150,000 Range Rover. It weighs 6,000 pounds. Section 179, IRS says anything over 6,000 pounds you can write off 100%. You could buy it on December 1st, write it off that year even though you didn't even drive the car.

[Brian Preston]

Boom. What?

[Unknown]

$158,000. You get to write it off that day against your earned income. If you have self employment money or an LLC producing other income, I would pay CA for the rainforever we did. But the Cullinan that I is a leased vehicle. I leased it with no money. I put it on a 24 month lease. Never longer than that. Whatever the payment is, if you can't handle that payment, don't do it. And then every 24 months I trade that car in. Why do I do a lease rather than own? Because I can write off 100% of that lease payment every month against my business income.

[Brian Preston]

Grant is one of those guys. He throws out some good stuff, but he also throws out some stuff that's got a lot of shades of gray, lots of gray. And when he's, he's spot on that look. When a vehicle weighs over 6,000 pounds, it's one of those little quirks of the the tax code that now qualifies as a piece of equipment or machinery that you can accelerate the depreciation through that section 179. The part he's failing to mention when he says 100% deductible is that it's going to make you track the mileage. You're going to have to compare what's business use, what's personal use, and so forth. And for a lot of people, it's hard to reach 100%. First of all, you can't even consider this unless it exceeds 50%. So the fact that he says you don't even have to drive it unless you're making YouTube videos or other things like grants, maybe he's got some way that he can justify it. But if you're running just a small business, I don't know that it necessarily works for you.

[Bo Hanson]

Who wants to have an auto payment every single month for as long as you exist? He said, I'm gonna lease it for 24 months, no more. Then I'm just gonna rinse and repeat, rinse and repeat, rinse and repeat, rinse and repeat. You know what's better than that, in my opinion? Buy a reasonable, affordable car today, pay cash for it, have no payments, drive that car for 7, 8, 9, 10 years, and don't be wasting money on the automobile. Yeah, so what if it's 100% deductible because it's a lease payment? You're still spending that money. You know what's better than getting the tax deduction? Not spending the money at all. It makes no sense.

[Brian Preston]

Well, deductible is not free. And also remember, even when you take a deduction, even if you're in the high tax bracket like Grant likely is, you're still paying 60 cents on the dollar. This is saving you the deduction. It's not free. Snitch on someone for not paying their taxes. You get 30% of whatever they owe. So if you want to pay 30% less in taxes, just don't pay your taxes. Snitches.

[Bo Hanson]

Get snitches and snitch on yourself. Just don't pay your taxes and snitch on yourself. No, I got to know, Brian. This is where. This is not inside of my tax lexicon. Is it true that there is some sort of benefit if you turn in a tax evader?

[Brian Preston]

I don't know about turning in. There's definitely whistleblower provisions, sure. But I don't think that this is a tool or tactic that you want to do on your neighbors that maybe aren't rolling the trash can behind the house or Doing things like. Because look, I always wonder, yeah, you could probably go tell on somebody if you know they're doing something that's incredibly illegal. But I'd also be careful of just being a person that's going to go get on the radar of telling on neighbors or doing something. I think that was a joke. I'm going to assume his tongue firmly planted on his cheek.

[Bo Hanson]

For sure it was a joke. There is no magical way to do that, but it would usually. What is interesting is if you get on the wrong side of the irs, if you are shady and you are aggressive and how you file your taxes, they can literally come and take your stuff. So you want to make sure you always stay on the right side of the IRS so that you don't have to turn yourself in.

[Brian Preston]

So don't get on the naughty list of the irs.

[Unknown]

I'm throwing birthday parties. Throw a mastermind event instead. Masterminds are tax deductible. If you're bringing your group of friends together, we should be talking about revenue generating activities. You're still going to have alcohol there, you can still have music there. And instead of just talking about how you're going to party and get turned up, we're going to talk about how we're actually going to make some money, help each other and push our ideas into the world and into the marketplace. This is how you're able to leverage the tax system while still having fun and turn around and get write offs for you and your friends.

[Brian Preston]

He's a blast to hang out with. I mean, he is already in two videos that I've experienced from this gentleman we've got. Our family is going to be eating free.

[Unknown]

This is how I'm able to afford having that private chef every single year, every single month, every single day, private chef every night.

[Brian Preston]

All I have to do is get them to pass the parmesan bread. And then all of a sudden I'm the CEO and my daughters, they're my minions that are running my enterprise here. And now he's figured out that he can have a way for all of his friends to hang out and it's deductible. Now, look, I do want to give a little bit of a nod. I'm a member of a mastermind group. You are too. But the difference is these are other successful business people we meet in the city. We have, yes, we break bread, but we really are like, we even have an outline, we have an agenda, we have forms that we're filling out to discuss. It is a true, like, I Can tell you I've learned about 504 loans on the SBA. I've learned about relationship stuff, all kind of things that can be very beneficial not only to my business, my personal life, but the purpose was ultimately for the good of the business. That's the key part that makes it deductible. As he shared in the past, feeding your family for free or bringing a group of friends together with a bunch of booze. It might be deductible if it's business related and legitimate business, but it doesn't necessarily mean it's always deductible. And that scares the heck out of me.

[Bo Hanson]

Yeah, I think, let me give him the bit of the doubt. Here's what he said that I liked. You ready for this? Hey, rather than spending your time going out partying, wilding out, getting turned up is the language that, hey, spend your time meeting with other like minded people to talk about how you can have successful business endeavors and make wise, productive financial decisions. I like that one much more than getting turned up. And if it happens to be inside of a business setting, then yes, it would be deductible. But it's probably not gonna be a bunch of knuckleheaded buddies sitting around partying. I don't think that's absolutely.

[Brian Preston]

I'm hopeful that maybe he really is just living the life where all he hangs out with is business owners. Doesn't mean that his family meals are free, as he shared in a previous video though.

[Grant]

So I accidentally put my lunch and my margarita on my business card, which means now I have to make it a tax write off. So that's what this video is for.

[Brian Preston]

Oh my go. By the way, I have been at it. I have been at an event where somebody says, hey, we gotta talk about some business, we gotta bring it up right now.

[Bo Hanson]

We gotta make this legitimate.

[Brian Preston]

And look, in some ways, as long as you got the right key people. Now this is back to my point as I was talking about earlier. You can't just be out with the family and you say, hey, I'm gonna put you on the payroll this month. So that makes this meal deductible. But I think that you do need to be mindful. The IRS doesn't mind you running meals and they're 50% deductible to you if once again, it's business related, meaning it's actually necessary for your business. But that doesn't mean that you just get to go to Disney World and say, hey, if I say the word amortization, it's almost like Cinderella or pixie dust has fallen upon this and it's now magical.

[Bo Hanson]

I would just caution you for most of your business lunches, maybe don't have margaritas every. It just seems like bad business. Seems like an aggressive standpoint.

[Unknown]

The more money you make, the more the IRS will take. So if you go from making 75,000 to $150,000, you're not going to see 75,000 divided by 12 on your paycheck. As a matter of fact, I know people who get a raise from 100,000 on their job to 200,000 and they've actually seen less on their check because the more money you make, the more tax brackets you enter into. I did not think it's usually the.

[Brian Preston]

Credits that cause what you just talked.

[Unknown]

About, they make more money and get less. That just didn't seem fair to me.

[Bo Hanson]

So yes, it is true. We live in a progressive tax system where as your income goes up, the percentage you pay on your next dollar does get taxed at higher and higher rates. However, I don't know that I agree with her assessment that I had someone who made $100,000 and then the next year they made 200,000 and they saw less. That seems like too big of a change to me. We have seen it at tighter income thresholds where higher income resulted in less take home pain because of losing credits or causing Social Security to become taxable or something along those lines. But to go from 100 to 200,000 and see less, that seems difficult to me because generally speaking, making more money is usually always better than making less money.

[Brian Preston]

The only way that I've seen that actually happen in practice is if you've now crossed over the tax credits. Like think about child tax credits. On a lower income side, it might be earned income credit or some of the other things that all of a sudden now the fact that you made more money, actually you got less take home pay. But for people who aren't running afoul of credits, it's mathematically impossible to go from 100,000 to 200,000 even if you're in a higher tax bracket to have less money. Now you might have a lower effective take home rate because your tax rates did go up because we're a progressive tax. But it doesn't necessarily mean that you're making less money.

[Bo Hanson]

Even if you're in the highest tax brackets and you're paying 50% taxes, every one additional dollar you make, while 50 cents of it is going to taxes, you still get to keep 50 cents. So it's not true that the more money you make, the less you keep in most circumstances.

[Unknown]

So this is you and this is your company. The goal is to make your company broke. On paper, if your company doesn't make any money, you don't have to pay any taxes. So this is how you can legally get the money out of your company.

[Brian Preston]

Yeah, but if you're buying Ferraris, that doesn't work either.

[Unknown]

You work for your trust. When you set up your trust, you transfer your intellectual property into the trust. So all the money your company generates with your intellectual property has to go back to the trust. And because we set up your trust in Cyprus, you don't have to pay any income tax, inheritance tax.

[Brian Preston]

Oh, my gosh. You realize that's where the crime just occurred.

[Unknown]

And benefit from them. Like there. Now watch our pinned video to know exactly how you can benefit from the work for your trust structure.

[Brian Preston]

Anybody and tell me if you have a cpa, you can put this in the comments. I guarantee you their engagement letter. One of the first things they're going to ask, they're going to ask you about two things, really. They're going to ask you about offshore holdings because they want to know if you have money outside the United States, because they want to make sure you're getting that reported. Otherwise they don't want to sign your tax return as your tax preparer. And they're going to ask you about crypto. And the reason is that it's kind of unique here in the United States is there are some exclusions, but the IRS and the United States requires all citizens to report all sources of income. Now, there might be some exclusions or some offsets, but the government wants to know what you're earning worldwide. So don't listen to some crazy YouTube video that says, go open up an account in Cyprus and voila, it now doesn't exist. To the government, that is a one way, fast track trip into getting treated like Al Capone.

[Unknown]

I'm in Dubai. Most people don't realize it's full zero tax. And they're like, no, no, I don't get it, but what's the stip? No, there's no stipulation. It is 0% corporate, 0% dividend, and 0% income. So the best part is I can go to Dubai, I can clean 50 million, be left with 50 million.

[Brian Preston]

This is why Monte Carlo is so popular too.

[Unknown]

50 million to 100 million, whatever the number is, and I can return back to UK and then never pay tax on that one.

[Bo Hanson]

He just used the word clean. I can go to Dubai, have 50 million, I can clean 50 million and then I can come back and have it. Even that just makes my spidey senses go off a little bit. Because while there are some truth to like corporate tax rates, the fact that I'm taking money from a jurisdiction where maybe I should be taking taxes and going somewhere where I should not be paying taxes, I start to get a little bit iffy there.

[Brian Preston]

Well, look, it's. And by the way, he's very clear, he's not a US citizen. He's going back to the uk And I don't know completely the rules for UK citizens, but here in the United States you are required to report all income. There could be some exclusions, other things. I've talked about that previously. Now I think what's interesting is that there are places that you can live that don't have income taxes like Monaco and other things. I mentioned that. But the problem is the only way you'd have to become a citizen of that territory to truly be subjected to zero taxes. Now another one I hear about all the time is Puerto Rico. Because there are some unique things that you can do if you wanted to move your business or live in Puerto Rico that potentially could lower your taxes substantially, but you actually have to live there. Yeah. It can't be a sham transaction. That's the key thing I want everybody to know is that, look, there are things written into the tax code typically to incentivize certain behaviors. And you have to ask yourself, why was this written? But what is never going to be in the tax policy or tax code is basically for you just to hide your money or illegally not pay taxes that you've earned and expect that the IRS is going to be completely okay with this. And there's all kind of precedent. We've picked on Al Capone before we picked on Wesley Snipes. There's all kind of people that have thought they could not pay a dime of taxes because somebody misled them and unfortunately found out the full weight and power of the federal government is that you should pay your taxes.

[Unknown]

Hey, tax tip Tuesday. Don't forget, gambling losses are a tax write off. Every day for lunch I come out.

[Brian Preston]

Come on, he's only telling half the story.

[Unknown]

You pick up an aluminum can, you get what, five cents? This right here, Two, three dollars a pop. I haven't paid taxes in years. Dig through your neighbor's trash, whatever. Go to the bodega, ask for the losers. So if your mother got your scratch tickets for a Stocking studio for Christmas. And they're all losers. Even better, you don't have to win to hit the jackpot.

[Brian Preston]

This is a joke.

[Bo Hanson]

It's a joke. So surely this had to be tongue and cheese. So what he's saying is gambling losses are deductible. So all I gotta do is go pick up a bunch of losing scratch off tickets and voila, offset all of your ordinary income and boom, you don't have to pay any more taxes. Brian, I don't think that's the way that it works.

[Brian Preston]

Look, you can deduct gambling losses to offset. Here's the key part that like I said, it has to be a joke to offset gambling gains. And so if you go and you're pulling the one arm Bandits say out in Vegas and you win a MAGA jackpot, you don't even have to be a mega jackpot. It just has to be big enough that they pull you aside and say, sir, we're going to issue a tax form. Of course the federal government then lets you state what are your other losses to offset that gambling gain. But they're not going to let you run around your mom's bingo match and write down and then assume all those losing ticket bingo cards is going to be a great deductible loss for you. That's fool's gold.

[Bo Hanson]

Remember, tax avoidance is highly encouraged. We have an entire tax system set up to help you figure out ways that you can avoid paying taxes. However, tax evasion is illegal and it will get you arrested and it will have your stuff taken away from you. So be so careful who you're taking tax advice from. Make sure the person you're listening to is qualified to be sharing the information they're sharing with you. And it's not some random person that you found on the Internet.

[Brian Preston]

That's the biggest thing is I think so many people are trying to tell you there's a shortcut. I tell you to be smart with your tax planning, but don't be a criminal. We're the Money Guy Show. I'm Brian, this is Bo. Money Guy Team out.

[Unknown]

The Money Guy show is hosted by Brian Preston. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only and does not constitute financial tax, investment or legal advice.