Pursuing extreme tax strategies

Pursuing extreme tax strategies
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#1

Greetings other FWF refugees. Reusing my old username here. (Even though I don’t like it. /shrug)

I started a new business at the end of 2017 as a sole proprietorship (unincorporated) and it has been going quite well. To the extent that I’ve been thinking about how to take extreme measures to optimize for taxes. These could include: setting up an LLC to exploit the Trump Tax bill, setting up offshore entities, establishing a tax residence in a tax friendly locale such as Puerto Rico.

My first question is where can I discuss these ideas with other like minded individuals online? The old FWF would have been my go to. Hopefully this place is a good option. Any others?

I’m starting to contact some tax consultant people for opinions, but accountants/tax people often don’t have the same mindset as business owners and it’s hard to find good ones. It would be great to be able to bounce ideas off others who are in a similar position.

Cheers.


#2

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#3

Let me add another specific topic to get things started… What does the IRS/state govts do to verify tax residence in a certain state? What’s needed to prove the X number of days threshold? If one 1) rents/buys a place in a state, 2) has bills addressed to that residence, 3) gets a drivers license there, and 4) registers and votes there … but then doesn’t really spend X number of days there, how would the IRS/state know? Do they track plane flights? Assume this is for a tax bill in the 6-7 figure range.


#4

They don’t really have to “know”. The burden of proof will be on your to prove you weren’t a resident once you get the tax bill from the state you don’t want to pay… CA and NY are pretty aggressive about it for high earners. Some things they look at…

Where did you receive medical care? Utility bills? Travel records? Where did you eat or buy gas? Where did your kids go to school?

It’s probably possible to stay off their radar for a while, but if they do catch you, the retroactive penalties on all the back taxes will be devastating,


#5

They literally count the days. You provide your proof for your count and they determine whether its sufficient. If you can’t get enough proof and/or can’t agree on what’s acceptable, you move to the next level. The tax authority can probably get things such as cell phone records.


#6

The hedge fund manager Julian Robertson famously beat a case against NY (city?) taxation. He kept good records and could prove exactly how many days he spent there.


#7

This is not uncommon. People have calendars of their location for each day. People with 7 figure incomes - it’s really not that hard to put together their daily locations.


#8

If I had 6 or 7 figures in state/city tax liability, I’d seriously consider just moving to a low tax area for real.


#9

Back in business already. :smiley:

So are we talking about providing bills for restaurants/grocery/uber/etc? It seems like in the internet era, especially if combining some FWF methods such as visa gift card usage, etc, it would be somewhat possible to produce such records in any location, and avoid producing them in other locations with some effort.

This and other methods are more concerning. Using a burner phone seems like an easy solution though. Flight records and hotel records would be most concerning. I wonder how often they go after these.

Yea it’s not that spending 183 days in PR would be so bad, but I like to keep my options open. :sunglasses:


#10

For US tax purposes? Also, remember, the count includes part of a day. Meaning, you cross into NY at 11:59pm then leave NY at 12:00am one minute later, you’re in NY for 2 days.

Haha, no one’s going to coach you on how to evade taxes. But if you’re being audited and the auditor gets the feeling you’re trying to hide something, they’re going to probe more. If you’re living in another country, pretty sure they’d be confused about why you don’t have travel records.


#11

Specifically thinking about PR in this case which is part of the US and has attractive treatment of capital gains.


#12

For US tax purposes, the testing period is 3 years. Current year and two previous years. It’s a lot more difficult not to be a US resident. Also, just to confirm - for a US citizen, this doesn’t matter - you pay taxes as a citizen no matter where you’re living.


#13

I assume that FD is not (and FWF would not have been) an acceptable place to discuss tax evasion strategies. Stick to tax avoidance.


#14

Fair enough, just trying to learn the parameters and boundaries of what’s expected. The mentions of Julian Robertson above were helpful, been reading about his exploits in this regard.


#15

If that’s where the job is, not much of a choice.


#16

You might check out these guys (no endorsement!)

http://www.taxlawsolutions.net/2016/11/29/can-move-puerto-rico-pay-almost-zero-tax.htm

I hear you can get your income tax down to 0-4% if you move to PR. US Virgin Islands are probably nicer though, with a 5% deal.


#17

Yes this is quite similar to what I had in mind, except I was thinking about establishing residence there right away.


#18

Yep. I have a friend who used to fly to Newark and stay at a hotel, lest he enter NYC for the extra day.


#19

What is the nature of the business?


#20

I agree with all of the replies here except the part about the IRS getting your cell phone records.

  1. Basic cell phone records don’t record the location that the call is made from
  2. Detailed records that tell what towers the calls are going through are reserved for extremely big crimes like homicide trials. It takes time to comb through records like that and those investigators are usually only concerned with a day or two of the suspect’s life. For a tax audit, they would have to do it for 365 days. I don’t see the IRS trying to get them and comb through the, as part of a routine audit.