Speaking from experience, what wealthy business owners actually do is WAY different than just swapping loans for profits. They: 1) Time their income recognition strategically 2) Maximize legitimate business deductions 3) Use entity structures to their advantage 4) Invest in assets that appreciate without creating taxable income 5) Use retirement accounts to defer taxes 6) Harvest tax losses to offset gains The loan strategy you described would be immediately problematic in an audit. Focus on legitimate tax planning instead!

I'm a tax preparer and see clients try variations of this strategy every year. The fundamental issue is that you're conflating cash flow with taxable income. Your business profit of $65,000 is taxable income that was already earned - taking out a loan doesn't change that fact. Here's what actually happens: You earn $65K profit (taxable), take a $65K loan (not taxable income, but creates a liability), then use the profit to pay the loan (not a deductible expense). You end up with the same $65K tax liability but now you've also paid loan interest for no benefit. The IRS has anti-abuse rules specifically targeting transactions that lack economic substance. What you're describing would likely be challenged as a sham transaction designed solely to avoid taxes. Instead, focus on legitimate strategies: maximize business deductions, consider retirement plan contributions, time equipment purchases strategically, or explore if your business structure is optimal for tax purposes. These approaches actually work and won't trigger audit red flags.

One important thing that hasn't been mentioned yet - make sure you're tracking your business expenses throughout the year! As a self-employed person (whether they call you vendor, contractor, or anything else), you can deduct legitimate business expenses to reduce your taxable income. This includes things like home office (if you have dedicated space), internet/phone (business portion), software subscriptions, professional development, etc. Those deductions can make a huge difference in your tax bill since you're paying both the employer and employee sides of Social Security and Medicare taxes.

Don't forget about quarterly estimated tax payments! Since you don't have taxes withheld as a self-employed person (whatever they call you), you likely need to make quarterly payments to avoid penalties. The safe harbor is generally paying either 90% of this year's tax or 100% of last year's tax (110% if your AGI was over $150k). Missing these payments can result in penalties even if you pay everything you owe by April 15.

Been through this before! Quick tip: most charities will happily provide a donation receipt after the fact. They want you to be able to deduct your donations so you'll keep giving! Just call and explain - most have standard forms they'll fill out for tax purposes.

Great advice from everyone here! One additional thought - when you contact the shelter for your acknowledgment letter, ask if they can also note in the letter that the donated items were new (assuming they were). This helps establish that you can use the full retail value rather than a discounted "used" value for your deduction calculation. Also, for future reference, many tax software programs and apps can help you track charitable donations throughout the year with photo receipts and running totals. Makes tax time much easier when you don't have to scramble for documentation! The $4,000 deduction could be significant depending on your tax bracket, so it's definitely worth the effort to get proper documentation from the shelter. Most nonprofits are very familiar with these requests and should be able to help you out.

Just a heads up for anyone using this method - the IRS has different departments handling different issues, so while you might get through to someone, they might need to transfer you. When I called about my stimulus payment issue last year, I got through using a similar method but then had to be transferred to the Economic Impact Payment team. The first agent was still able to look up my information though, so it wasn't a waste of time. Just be prepared that you might need to go through multiple agents depending on your specific issue.

Thank you so much for sharing this! I've been trying to reach someone about a Form 5498 discrepancy for weeks with no luck. The automated system keeps hanging up on me after I enter my information. Quick question - when you say "don't enter anything" for the SSN prompt, do you just wait for it to time out or press a specific key? I want to make sure I follow the steps exactly. Also, did the agent who called you back have access to all your tax information, or did you need to verify your identity again when they called? I'm trying to prepare everything I might need ahead of time. Really appreciate you taking the time to help fellow taxpayers navigate this maze!

I completely understand your frustration, Hunter! I went through this exact same process a few months ago and felt like I was going in circles. What helped me was realizing that there are actually TWO separate things happening: 1) Having an ID.me account (which you already have), and 2) Authorizing that account specifically for IRS access. Think of it like having a driver's license but still needing to register to vote - they're related but separate steps. The key is making sure you complete that authorization step when you log in through the IRS website. Once I understood this distinction, the whole process made much more sense. You've got this!

Hunter, I completely feel your pain on this! I just went through the exact same thing two weeks ago and was pulling my hair out. What finally worked for me was going to irs.gov, clicking "Sign into Your Online Account," then selecting ID.me, and here's the crucial part - when it asks you to authorize the IRS to access your ID.me information, you HAVE to click "Allow" or "Authorize." I had been logging into ID.me successfully but kept missing that final authorization screen. It's like having the right key but forgetting to actually turn it in the lock! The whole process took me about 10 minutes once I realized what I was missing. Don't give up - you're probably closer than you think!