The Largest Tax Refund Request Ever! Plus Tax Tips For Small Business Owners

Tax Scam

In what could be the most amazing tax move ever, a Georgia woman filed a $94 MILLION tax refund! You have to make over $1.6 billion dollars in income to pay $94 million taxes with Georgia's 6% state income tax rate. Sure, it's possible to make $1.6+ billion dollars, but probably not by this woman.

So how on Earth did she get caught pray tell? Investigators asked the woman to come to the supermarket to pick up her $94 million refund check. That’s when she was arrested.

Supposedly the woman kept calling in to the Georgia tax department asking when her tax refund would be ready. I guess if I was really expecting to get a check that big, I might not be able to help myself either!

But a smarter person might have hired an impersonator instead for $500,000 to pick up the check for her and bounce. I mean, what's paying 0.5% of your tax refund to drastically improve your chances of not getting caught anyway?

Stupidity can't be the reason why this tax fraud happened. Greed must be the main reason wouldn't you agree?


Nobody in their right mind likes to pay taxes. The only people who I know are cool with taxes are those who don't pay any taxes and then vote to raise taxes on others. That's pretty messed up, but I understand the logic.

After reading about this $94 million dollar tax refund claim, I was thinking of some better ways to legitimately reduce one's tax bill for the year end. And I've come to the conclusion that if you make much more than $100,000 a year per individual, there's no way to ever completely avoid paying taxes due to AMT, FICA tax, sales, tax, property tax, and so forth .

I do want to share some feedback I've received from an auditor and a tax accountant friend on how to holistically think about your taxes to better manage your tax expense. I'm busy doing my own taxes now with H&R Block and will have some more insightful tips for everyone in an upcoming post.

These five tips pertain more towards small business owners and freelance workers/independent contractors.

1) Always pay some taxes.

The people or corporations who are first targeted are those who consistently never pay taxes due to poor revenue or large losses. My accountant told me he once had a client who was making $50,000 a year as a hotel worker, but wanted to force through $40,000 in clothing expenses. Add on other expenses and the goal was for the client to get a refund. Not going to fly!

So long as you are paying income taxes, you stand a lower chance of getting an audit. It's like a binary scenario where you are categorized as high risk when claiming any refund beyond the average, and never claiming any refund even if you are paying less in taxes than you should be paying.

2) Reduce the volatility of your tax returns.

Suddenly paying less or more taxes may raise red flags. 2013 was the first year when my income and tax bill dropped by more than 50% because my severance check was paid out in 2012. 2013 was my worry year because California and the Federal Government was used to mugging me for six figures in annual income taxes for years.

So far, the federal and state government haven't come knocking on my door yet, but who knows. If they do, I'll have them do my tax returns because I think I may have screwed up on accounting for deferred stock sales, which resulted in me overpaying. The goal is to smooth out your tax returns so that no warning lights go off.

3) Understand industry margins and ratios.

If you are in the highly profitable software industry where operating profit margins are regularly around 20%, it will look odd if your company consistently reports 90% operating profit margins or 5% operating profit margins.

Reporting 90% operating margins means you will be paying more taxes, so the more common case is under-reporting income by perhaps over-reporting expenses. You have every right to operate a bad business, but the longer your bad business exists, the more likely you will be audited. The idea is that the IRS doesn't want you running some business for the main purpose of offloading all your expenses.

4) Spend heavily for the future. 

You're either going to pay the government more in taxes or you're going to buy things on your business that you can enjoy.

For example, if I wanted to shield about $80,000 of business income I should have bought a new $100,000 Range Rover Sport Supercharger. I could easily deduct 80% of the cost (20% personal) as a business expense and enjoy pimping around in my new ride (See: Tax Rules For Deducting A Truck Or SUV).

After all, I've got to drive to see my clients, go through the snow to maintain my Lake Tahoe property, and move people around. Instead, I'm only expensing about $200 a month in lease payments with Rhino, my 2015 Honda Fit.

I could have flown first class to London last summer for $6,500 and stayed at The Berkeley Hotel for $650 a night for 10 nights. Instead, I flew economy for $1,400 and stayed at a much cheaper place in East London. There's a lot of flexibility, within reason, regarding expenses.

5) Give your money away to as many people you care about as possible.

You might give money away to yourself by taking first class flights and buying fancy cars. You can also give money away to yourself by maxing out your your SEP IRA and solo-401k. But a great way to reduce your tax bill and enrich other people is to hire other people you care about to do work for you.

Let's say your mom is a retired accountant who is looking for work. Why not hire mom for an industry leading salary to help do your finances? Surely you can trust your mom!

Let's say your best friend is struggling to make ends meet. Why not hire him to do some consulting work for your company? Take care of the people you care about who are struggling, to reduce your tax burden.

Personally, I've created career insurance for my children for keeping an online business going. With the decline in merit-based reward, I want an insurance policy just in case hard work is no longer enough.


For those of you who own small businesses or are freelancers with Schedule C's, it's more important than ever to do a monthly or quarterly review of your financials. Income and expenses can get out of hand real quick.

You want to have a relatively smooth business flow that doesn't breach normal seasonality patterns. Amortizing the expense over 12 months is much better than expensing the whole item in December, for example.

For individuals who don't own businesses, it's also important to monitor your income, expenses, and withholdings. How many times do you hear people get totally side-swiped because they owe a huge tax bill at the end of the year.

It should be no big deal if you have methodically set aside money for the tax expense, but people seldom do. Max out your pre-tax retirement accounts, utilize your mortgage interest deduction, and figure out a way to start earning money that's taxed at a lower rate like dividend income rather than mostly W2 wages.

Readers, what are some ideas you have for legally shielding large amounts of income from taxes?

Related posts to largest tax refund:

How Tax Collectors Cleverly Rob You Of Your Money

Why You Should Probably Do Your Own Taxes

Long-Term Capital Gains Tax Examples

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27 thoughts on “The Largest Tax Refund Request Ever! Plus Tax Tips For Small Business Owners”

  1. Wouldn’t it be nice if everyone decided to refuse to pay income taxes? Would the federal government arrest everyone in the United States? And when are we going to see a state succeed from the federal government….looking forward to it!

  2. My best tax tip is for the self employed: make sure you file your estimated taxes every quarter!

    Almost everyone I know who has started consulting / contracting in the tech sector didn’t know about estimated taxes and was penalized come April. I was lucky to have a mentor who coached me through the whole experience.

    1. Excellent tip. I knew about it, but I didn’t pay b/c I wasn’t sure I’d continue. But, I was sure my W2 wage would continue to increase due to the way I structured my business, which was increasing. I’ll discuss more about this in my upcoming post. All about the safe harbor rule. I didn’t get penalized in 2014, and I worked the full year as a freelancer.

  3. Above Average Black

    The plan sounded bad from the start. She claimed 99 million dollars in wages for which she didn’t pay any taxes on. If she really did earn 99 million dollars in wages, One would think she would owe a bunch of money, not get a refund.

  4. Financial Planner Dude

    Hey Sam

    I think you need to go back on your meds, your paranoia is kicking in again just kidding (hope that was funny and not offensive). Garth Turner ( is one the most astute investors I know, while 95% of his daily blog posts are regarding the CDN housing bubble the rest deal and investing (balanced portfolio) and taxes. And this is where he really stands out he made a comment that totally revolutionized my thinking, he said

    “Most people, of course, simply don’t understand how they’re taxed or what to do to minimize the impact. They also don’t realize how the tax system is skewed to ensuring the rich stay that way”

    For example many baby boomers are sitting on massive tax bombs in the form of large RRPS (American equivalent of a 401K). One column dealt with a family where the father had died and passed on a 800K RSP to the wife. The kids were freaking because they realized that upon the moms death the 800K would be added to her income and taxed as income!!!!!

    My Dad upon his death had a similar sized portfolio but all non registered and while settling the estate was a huge job, the estate paid in the order of 10% taxation. Huge difference!

    I have a niece whose husband is a few months away from becoming a 1 percenter (Doctor) and I told her to not even bother going back to work and to use the RSP as a tool to transfer income from him to her. Done right not only will they get 1000s in refunds but the income can then be transferred to her and withdrawn at a much lower tax rate.

    Same with withholding taxes on ETFs everyone worries about management fees but the withholding tax (15-30%) is a much bigger hit. Even I missed that one!!!!

    While my family is in Canada I live in Germany and understanding the tax system has allowed me to add 1000s to my income tax free (it would be a whole post to explain the ins and outs)

    Rob aka the Financial Planner Dude

  5. WOW. I wonder what gave her away?

    My SE tax liability last year was an unpleasant surprise, so I’m trying to figure out a way to reduce it this year. I’ll definitely look into the SEP IRA and Solo 401k. What are your thoughts on doing an S Corporation? I’ve read a little about it, but not sure if it would be a good idea for me or not.

    1. S Corp is fine. It allows you to pay yourself a low reasonable wage, and take distributions for the rest, which isn’t subject to the FICA tax. Of course, check your accountant!

      Also, shoot me an e-mail when you’re in SF. If I’m around, let’s catch up!

  6. Adam @

    I prefer a small refund just because psychologically it’s more pleasant than paying out. It’s not totally rational but still true.

    I’m amazed at what Go Curry Cracker manages to do with their 6 figure income and pay zero in taxes. Just shows the advantage of early retirement.

    My income is mostly salary, so even maxing out my deferred accounts I end up with a hefty bill.

  7. Gen Y Finance Guy

    Well you have to have people like this in the world…otherwise we would have nothing to laugh about. Really $94M???

    I would love to known what went through her mind when they handed her the check before she got arrested.

    Personally, I just got done with my taxes last weekend and am left with a small tax bill of about $2,200. I am more than prepared to pay the bill.


    1. Having a small tax bill is generally a good move.

      1) It means you got a free loan
      2) It means you’re satiating the IRS a little by writing them a check. There’s a stream of thought from my auditor that if you keep getting a refund at the end of the year, your “phantom audit points” go up until one day, the IRS starts knocking.

  8. Found this publication on Nolo and it has some very helpful, easy to follow tax guidance for landlords:

  9. I would love to hear the dialog that was running through that women’s head as she filled out her tax forms and then hassled to get her “refund.” Oh the stubborn and foolish things that people do…

    I owed taxes this year, but I anticipated that I would, so it wasn’t a shock. I don’t like surprises so I usually crunch numbers throughout the year so I have ball park range on what I might get back or owe. Each year I take notes too because I always end up learnings something new in the process and I keep a checklist that I update with all the various forms that I received and had to file.

  10. My nanny said she was strapped for a few hundred extra bucks per month because she’s going to have to start paying her student loans. Obviously, I don’t want to lose her over 3/400 per month. I am considering buying a website that makes ~1000/month, have her run it on a contract basis and write off the expense. She said she’s down.

    1. Sounds smart to me! It’s better to give money to people we know for good work than give it to the government. Now you just have to help her on her taxes so she doesn’t pay too much to the government.

  11. One thing that has helped me is always remembering that we can always file a 6-month extension. If the choice is submitting a hastily done return that could raise red flags with the IRS vs. taking time to do things well (trying to discover tax strategy in the process), then for me the choice is simple. I did this last year, and foun form 4868 incredibly simple to file.

    1. Simon, great tip on being able file an extension. I would like to add that while filing an extension can give you more time to file, it is important to remember that it is not an extension to pay. If you anticipate owing money, you will need to make a payment with your extension, otherwise expect penalties and interest to be added on to the balance due.

        1. I should add that all states I’ve looked at have an equivalent amended form. (They would have to, since any changes to the federal return would affect the state.) The one time I did this (I had erroneously claimed the standard deduction when I first moved to NY, but was actually entitled to the itemized deduction), I found the form very easy to use. For any line item needing amendment, you simply put the original amount in one column and the change in another.

          1. Good to know Larry. Does it cost anything more to do? The form sounds simple to do. I’m just wondering how easy it is to amend b/c you forgot to include something, like a K-1 that doesn’t get sent until after April 10 and you forget, not so much changing a wrong number.

            1. Have a look here:

              You do need to enter an explanation of changes and to attach any supporting schedules, such as your K-1. And then you work out the parallel forms for your state.

              Shouldn’t cost any more, in that the 1040X cannot be electronically filed. The only trick, I think, is timing, or at least so my accountant friends have told me: wait until you’ve received your refund or the IRS has deposited your check; also, even though you have three years to amend, don’t wait that long – because if you’re amending in 2014 for a 2011 return, you may also have to amend 2012 and 2013 if the tax information for the later years depends on any of the earlier years.

              See also:

  12. I already received my federal and California refund for 2014. Even with it being 100% legit, I worry about it getting held up or audited before I can get it. Fortunately, it came through in onyl a couple of weeks.

    Maxing out tax advantaged retirement accounts is the best way to lower taxes for someone making six figures in my opinion.

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