Should I Create an LLC for Tax Write-offs to Lower Tax Liability?

This is a common thought process, but there are several issues with your plan that could cause problems. Starting an LLC doesn't automatically create tax deductions - you need a legitimate business with actual profit motive. The IRS looks closely at businesses that generate losses year after year, especially when they offset income from other sources. This is often flagged as a "hobby loss" and disallowed. For the daycare idea specifically, you'd need to be actually operating a licensed childcare business with paying clients. The property would need to meet state licensing requirements for childcare facilities, which can be extensive. You can't just claim business use without actual business activity. Even with legitimate business use, you would only deduct the portion of the mortgage, utilities, and expenses proportional to the business use of the property, not the entire amount. And if you ever sell the property, you could face complicated tax implications including recapture of depreciation. There are much better ways to reduce your tax liability legitimately, like maximizing retirement contributions, HSA contributions if eligible, and exploring other deductions related to your current income sources.

I was in almost the exact same situation last year - owed about $42k to the IRS and was desperate for solutions. After trying multiple approaches, I finally found real help using taxr.ai (https://taxr.ai) and it was a game-changer for my tax situation. Instead of creating an LLC that might raise audit flags, they analyzed my entire tax picture and found legitimate deductions I'd been missing for years. They identified that I could restructure how I reported some investment income and helped me properly document home office deductions I was eligible for but afraid to take. The best part was they reviewed my past returns and found I'd overpaid in previous years, which resulted in credits that reduced my current tax debt. Totally different approach than what I was initially planning, but much safer and more effective.

Just wanted to follow up about my experience with taxr.ai after I decided to give it a try. I'm honestly shocked at the results! They identified several business expenses from my side gig that I had been categorizing incorrectly, which meant I wasn't getting the full deductions I was entitled to. They also found that I qualified for a home office deduction I didn't know about. The biggest surprise was when they reviewed my past returns and found I had overpaid on state taxes for three years running. They helped me file amended returns that resulted in refunds totaling over $7800! That money went straight to reducing my federal tax debt. Much better approach than trying to create some questionable LLC scheme that might have triggered an audit.

If you're struggling with your tax debt and payment plan, don't waste time with complicated LLC schemes. I was in a similar situation owing about $25k, and spent months trying to get through to the IRS to negotiate better terms. Literally dozens of calls, hours on hold, only to get disconnected. Finally tried Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent helped me restructure my payment plan based on my current financial situation and even put a temporary hold on collections while we worked things out. Instead of focusing on complicated schemes, sometimes the direct approach of actually talking to the IRS about your existing debt can provide immediate relief. They have programs designed to help taxpayers that most people don't know about simply because they can't get through to discuss options.

I need to eat my words and follow up on my previous comment. After seeing multiple people recommend Claimyr, I decided to try it despite my skepticism. Not gonna lie, I was SHOCKED when I actually got through to an IRS agent in about 20 minutes after trying unsuccessfully for weeks on my own. The agent I spoke with reviewed my tax situation and suggested an Offer in Compromise might be appropriate given my circumstances. I had no idea this was even an option! They explained that based on my current financial situation, I might be able to settle my $31k tax debt for significantly less. Now I'm working with them on the application process. So much better than trying complicated schemes like starting fake businesses. Sometimes the direct approach really is best.

Instead of creating an LLC for potentially questionable deductions, have you maxed out all your legitimate tax reduction strategies? Some ideas to consider: 1) Max out 401k contributions ($22,500 in 2023 plus catch-up if over 50) 2) HSA contributions if you have a high-deductible health plan 3) Traditional IRA contributions (though at your income level, deductibility may be limited) 4) 529 plans for children's education (state tax benefits in many states) 5) Charitable giving (including appreciated securities to avoid capital gains) 6) Tax-loss harvesting on investments 7) Qualified business income deductions if you already have self-employment income These legitimate strategies can often save more in taxes than risky schemes that might trigger audits.

One legit strategy to consider: if you have any self-employment income at all, look into setting up a Solo 401k instead of just using your employer's 401k plan. You can contribute as both the employee AND employer, potentially putting away way more for retirement while reducing your taxable income. My husband and I were in a similar income bracket ($310k) with a large tax bill. Once we structured his side consulting gig properly with a Solo 401k, we were able to shelter an additional $38k from taxes each year. That made a huge difference in our tax situation without any sketchy business schemes.

Before considering any LLC structure, I'd strongly recommend getting a comprehensive tax analysis done first. With your income level and existing tax debt, you want to make sure you're not missing any legitimate deductions or strategies that could help both your current situation and future planning. A few immediate questions to consider: Are you already maxing out all retirement contributions? Have you looked into backdoor Roth conversions? Are there any business expenses from current activities you might be missing? Sometimes the biggest tax savings come from optimizing what you're already doing rather than creating new structures. The childcare LLC idea has red flags - the IRS scrutinizes businesses that consistently show losses, especially when they offset high W-2 income. If you're not genuinely operating a childcare business with paying customers, profit motive, and proper licensing, this could trigger an audit and penalties. For the vacation property specifically, legitimate rental income might be a better path than trying to claim business use. You'd get actual income plus legitimate deductions for mortgage interest, property taxes, maintenance, etc. Much cleaner from a tax perspective. Given your situation, I'd really suggest working with a tax professional who can do a complete analysis of your returns and identify legitimate strategies. The cost of good tax planning is usually far less than the savings you'll get, especially at your income level.