Why Small Business Owners Owe the IRS—and How to Avoid It

In this episode of How to Lower Your Tax Bill, host Terrance Hutchins is joined by co-host T’Mia Kelly to explore the top five tax mistakes small business owners make—and how to avoid them. If tax season caught you off guard this year, this episode is packed with real-world insights and practical strategies to help you stay ahead of the IRS, avoid penalties, and better plan your business finances.

Whether you're new to entrepreneurship or a seasoned business owner, understanding these pitfalls can save you thousands.

Key Topics Covered:

• Why underpaying estimated taxes can trigger costly IRS penalties
• The “Safe Harbor” and “Pay-As-You-Go” methods for managing estimated payments
• Why paying in cash doesn't exempt you from reporting income
• The dangers of commingling business and personal expenses
• The true cost of buying things "just to save on taxes"
• Why taking advice from TikTok or social media can get you in trouble with the IRS

Featured Tax Case: In Trinidad v. United States (1977), the court denied a nightclub owner’s attempt to deduct the living expenses of his live-in girlfriend, even though he claimed her presence helped him stay “relaxed and happy” for work. The IRS ruled that personal relationships—even morale-boosting ones—aren’t legitimate business deductions.

Pro Tip: Avoid tax trouble by setting up proper systems early on—like separating your business and personal finances, issuing 1099s to contractors, and seeking professional advice before making big purchases or financial moves.

For more strategies to reduce your tax bill, subscribe to How to Lower Your Tax Bill on Spotify, Apple Podcasts, or your favorite platform.

And remember: Keep More of What You Earn.

Phantom Income: Why You Might Owe Taxes on Money You Didn't Actually Receive

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins explains one of the trickiest pitfalls in tax planning—phantom income. Terrence breaks down the critical IRS doctrines of constructive receipt and economic benefit, helping you understand why you might owe taxes even when you don’t have cash in hand.

Whether you’re a business owner, investor, or receive stock-based compensation, this episode will help you spot hidden tax traps and plan ahead more effectively.

Key Topics Covered:

• How tax law defines income—even when you haven’t been paid
• Real-world examples where taxes can hit harder than expected
• What to know about depreciation, business vehicles, and partnership income
• Why proper planning can prevent costly surprises

Featured Tax Case: In Sproul v. Commissioner (1945), the court ruled that even though a trust payout was scheduled for future years, the taxpayer owed tax immediately due to guaranteed access. A key reminder that tax law doesn't always follow the cash.

For more smart tax strategies, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts.

And remember: Keep More of What You Earn.

Write It Off? Not So Fast — Common Tax Deduction Myths Debunked

In this lively and eye-opening episode of How to Lower Your Tax Bill, host Terrence Hutchins is joined again by now co-host T’mia Kelly to break down one of the most misused phrases in personal finance—"Just write it off!" From W-2 employees trying to claim home office deductions to well-meaning givers misunderstanding charitable write-offs, this episode tackles the biggest misconceptions around tax deductions.

Terrence and T’mia explain why context matters, what’s actually deductible, and how blindly chasing write-offs can cost you more than it saves. This episode is a must-listen as we approach tax deadlines and gear up for smarter tax planning in the year ahead.

Key Topics Covered:

• The origin of the “just write it off” mindset—and why it’s flawed
• Common tax deduction mistakes W-2 employees make (hint: your home desk setup may not qualify)
• Why charitable giving (including GoFundMe and goodwill donations) often doesn’t deliver the tax benefits people expect
• When home improvements and vehicle purchases are not tax-smart
• Why filing separately when married can cost you more in taxes
• Missed opportunities with 401(k) and HSA contributions
• Key advice: don’t confuse tax planning with tax filing

Featured Tax Reminder: You can't "write off" what you don’t understand. Documentation, timing, and proper classification are key to maximizing real deductions—and avoiding disappointment at tax time.

For more clarity on how to separate fact from fiction in your tax planning, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts.

And as always: Keep More of What You Earn.

#KeepMoreOfWhatYouEarn

Rental Property Deductions: What Landlords Need to Know

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins dives into one of the most potent tax tools for real estate investors—rental property deductions. Whether you’re managing a single unit or a growing portfolio, Terrence breaks down what qualifies as rental income, what deductions landlords often miss, and how to avoid trouble when renting to family or below market.

Key Topics Covered:

• What qualifies as rental income (including security deposits, lease break fees, and payments in kind)
• How rental income is taxed and when net investment income tax applies
• What landlords can deduct:
• How to fix missed depreciation deductions from past years using Form 3115
• The Qualified Business Income (QBI) deduction and when to use the Safe Harbor election
• Why renting to family or charging below-market rent makes your property a not-for-profit rental, disqualifying you from valuable deductions
• A key court case (Barte v. Commissioner, 1998) that shows why renting to relatives at a discount can cost you at tax time

Featured Tax Tip: Renting out a property for 14 days or less? That income can be tax-free—but if you rent long-term to family below market, expect limited deductions and potential gift tax concerns.

If you’re in the rental game, make sure you’re getting every tax break available—and avoiding traps that can cost you thousands. Subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts.

And as always: Keep More of What You Earn.

Are You a Real Estate Dealer or Investor? Why It Matters More Than You Think

Episode Description: In this episode of How to Lower Your Tax Bill, Terrence Hutchins explores a key distinction that could dramatically affect how much tax you owe on your real estate income: are you a dealer or an investor? If you’re flipping houses or building a rental portfolio—or doing both—how the IRS classifies your activity can mean the difference between capital gains taxes or ordinary income plus self-employment tax.

Terrence walks through how the IRS makes this classification, what the tax consequences are, and what you can do to protect your profits. He also shares a powerful seven-point filter for analyzing real estate investments and wraps up with a fascinating tax court case that could help you if the IRS challenges your classification.

Key Topics Covered:

• The seven-part filter to assess real estate deals: risk, upside, tax treatment, control, effort, time, and fees
• Dealer vs. investor classification and how the IRS determines your status
• Why your intent and documentation matter more than your titles
• The tax impact:
  • Dealers pay ordinary income tax and self-employment tax
  • Investors pay long-term capital gains tax (if held more than a year)
  • Dealers can’t use depreciation or 1031 exchanges—but investors can
• How to avoid accidentally being classified as a dealer
• Tips for structuring your real estate activity: use of LLCs, separate accounts, tracking time, and keeping records
• When using an S corporation might help flippers reduce self-employment tax

Featured Tax Case: In Byron v. Commissioner, John Byron sold 22 real estate properties over three years, netting $3.4 million. The IRS classified him as a dealer—but the court disagreed, citing his lack of active marketing, minimal involvement, and intent to hold for investment. The result? Byron paid capital gains tax instead of a much higher ordinary income tax rate.

This case highlights why documentation and strategy can make or break your tax outcome.

For more real estate tax tips, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. And as always: Keep More of What You Earn.

#KeepMoreOfWhatYouEarn

Tax Deductions & Credits: What You Don’t Know Could Cost You

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins is joined by T’mia Kelly to break down the difference between tax deductions and credits—and how understanding them can save you thousands. They dive into carry-forward tax benefits, the importance of reviewing last year’s tax return, and how historical tax changes (like the introduction of the standard deduction in 1944) continue to impact taxpayers today.

Key Topics Covered

• The difference between tax credits (dollar-for-dollar reductions) vs. tax deductions (which lower taxable income).
• Common carry-forward deductions that can lower your tax bill in future years, including:
  • Net Operating Losses (NOLs) for business owners.
  • Capital losses from stocks and investments.
  • Passive activity losses from rental properties.
  • Charitable contribution carry-forwards for those who donate large sums.
• Business tax credits like the Work Opportunity Tax Credit (WOTC) and R&D credit—and how to leverage them.
• How solar panels and energy-efficient home upgrades qualify for tax credits (but don’t believe every salesperson’s pitch).
• The importance of reviewing last year’s tax return to avoid missing out on deductions and credits you’re entitled to.

Featured Tax Fact

Did you know that before 1944, tax brackets were so complex that President Franklin D. Roosevelt would submit his tax return half-completed with a $15,000 check, telling the IRS to "send him an invoice" for the balance? The complexity of tax deductions at the time led to the creation of the standard deduction to simplify the process for Americans.

For more expert tax strategies, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. And as always: Keep More of What You Earn!

#KeepMoreOfWhatYouEarn

Smart Tax Refund Strategies

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins and guest T’mia Kelly debunk tax refund myths and explain why a big refund isn’t always a win. Learn how to adjust your withholdings and keep more of your money year-round.

Key Takeaways:

• Why Tax Refunds Feel Good: The psychology behind refunds.
• How Refunds Work: Withholdings, deductions, and credits explained.
• Optimizing Your W-4: Adjust withholdings to avoid overpaying taxes.
• Side Hustle Tax Planning: Track income and expenses to prevent surprises.
• The Time Value of Money: Why keeping your money upfront is smarter.

Featured Tax Insight:

• The Time Value of Money: Why a dollar today is worth more than a dollar in the future and how it applies to your tax refund.

For more tax-saving insights, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. Have questions? Email [email protected], and we’ll answer them in a future episode. Keep more of what you earn!

Understanding Suspended Losses: Real Estate Tax Strategies

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins dives into suspended real estate losses—what they are, why they happen, and how to unlock them for tax savings.

What You’ll Learn:

• What Are Suspended Losses? How the 1986 tax law introduced passive activity loss rules and how they impact real estate investors.
• Income Thresholds for Deductions:
  • If income is below $100,000, up to $25,000 of losses can be deducted.
  • Between $100,000 - $150,000, the deduction phases out.
  • Above $150,000, losses are suspended and carried forward.
• Strategies to Unlock Suspended Losses:
  1. Lowering Taxable Income: 401(k) contributions and other deductions to stay below $150,000.
  2. Generating Passive Income: Offset gains from real estate partnerships or short-term rentals.
  3. Becoming a Real Estate Professional: Meeting the 750-hour rule to deduct losses in the current year.
  4. Selling a Property: Unlocking losses upon the sale of an individual property.
  5. Grouping Election Strategy: Combining multiple properties to meet material participation rules.

Featured Tax Case: May vs. Commissioner (2005) – A real estate investor lost deductions due to failing to elect property grouping. This case highlights the importance of properly documenting participation and making necessary tax elections.

For more tax-saving strategies, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. Have questions? Email [email protected] and we’ll address them in a future episode. The key to tax planning is not just reducing your bill—it’s keeping more of what you earn.

Repairs vs. Improvements: Maximizing Your Rental Property Deductions

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins explains the critical differences between repairs and improvements for real estate investors and W-2 filers with rental properties. Understanding how the IRS classifies these expenses can have a significant impact on your tax deductions and long-term financial strategy.

What You’ll Learn:

• Repairs vs. Improvements: Repairs (e.g., patching drywall, fixing leaks) are deductible immediately, while improvements (e.g., new roof, HVAC) must be depreciated over 27.5 years.
• IRS Safe Harbors:
  • Small Taxpayer Safe Harbor – Deduct up to $10,000 or 2% of property value.Routine Maintenance Safe Harbor – Deduct recurring maintenance costs.
  • De Minimis Safe Harbor – Deduct expenses under $2,500 per item.Partial Disposition Election: Deduct the remaining cost of replaced property components.

LaPointe vs. Commissioner (1990) – A real-world case where a taxpayer incorrectly classified renovations as repairs instead of improvements, leading to disallowed deductions and increased tax liability.

For more tax-saving strategies, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. If you have questions, email [email protected], and we’ll address them in a future episode. The key to tax planning is not just reducing your bill—it’s keeping more of what you earn.

Installment Sales: Tax Strategy for Deferring Capital Gains

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins explores how installment sales can help defer capital gains taxes and provide flexible income streams for property owners and business sellers. Terrence, a financial and tax advisor in the Dallas-Fort Worth area, breaks down the rules, benefits, and potential pitfalls of this strategy.

What You’ll Learn:

• Installment Sale Basics: What qualifies as an installment sale and why you might choose this strategy.
• Tax Benefits: How deferring capital gains taxes can help reduce your overall tax burden.
• Interest Requirements: When and why you must charge interest on deferred payments.
• Depreciation Recapture: Why depreciation must be reported as ordinary income in the first year of sale.
• Income Splitting Strategy: How married couples can split property sales to avoid IRS interest charges.

Special Considerations:

• Transaction Limits: No interest required for sales under $150,000, but interest payments to the IRS apply to sales over $5 million.
• Related Party Rule: Sales to family members who sell the property within two years trigger immediate taxation.
• Restricted Use: House flippers and stock sales do not qualify for installment sales.
• Business Sales: How contingent payments tied to business performance impact taxable income.

Tax Court Case Spotlight:

• Police vs. Commissioner: A restaurant sale case that highlights the IRS’s requirement to report depreciation recapture as ordinary income in the first year.

Tax Forms to Know:

• Form 6252: Required for reporting installment sales.
• Form 4797: For rental property sales.
• Form 8594: For business asset sales.

Pro Tip: Combining a 1031 exchange with an installment sale can help defer taxes on both replacement properties and cash proceeds.

For more tax-saving strategies, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts. Have questions? Email [email protected] and get your answers in future episodes.