From IRS Insider to Tax Strategist: The Smart (Legal) Ways High Earners Cut Taxes
Featuring a conversation with Gabe Hogan — former IRS revenue agent, tax attorney, and founder of Palmettos & Prickly Pears Tax Filing and Advisory
TL;DR:
Most CPAs operate like historians: reporting what happened.
Great tax pros act like strategists: shaping what will happen.
Gabe Hogan, ex‑IRS auditor and tax attorney, pulls back the curtain on the IRS, audit realities in 2025, and the most effective, legal plays for business owners and high‑earning W‑2 professionals.
Why “Historian” Tax Prep Leaves Money on the Table
A lot of taxpayers assume a CPA is the only route to quality tax help. Not quite. Gabe’s a tax attorney (not a CPA) with a Master of Law in Taxation who practices under Circular 230, meaning he can represent clients across all 50 states and in front of state taxing authorities.
Key idea: Most CPAs are trained to compile, reconcile, and file—looking backward. Attorneys and forward‑leaning advisors tend to build structures, assess risk, and plan ahead. The best outcomes come from a team that does both.
Inside the IRS: Bureaucracy, Fear, and What Really Gets Attention
Gabe spent four years as a federal revenue agent. His takeaways:
Outdated systems and process bloat slow everything. (Think green‑screen terminals and pandemic‑era faxing.)
The culture leans on fear to create voluntary compliance—especially among rule‑following preparers.
Audit staffing is thin. Morale is low. Training new agents takes years. Translation: expect more reliance on algorithms and materiality screens rather than nuanced technical reviews.
What that means for you:
There’s still enforcement—but the IRS often chases big, easy wins. If you’re organized and your strategy “passes the smell test,” you’re already ahead of most files in the pile.
Speed Limits, Not Handcuffs: How to Think About Tax Law
Gabe’s favorite analogy: tax law is a speed limit. There’s a difference between 10 mph over (you might get a ticket) and going 90 through a school zone (you might go to jail). Smart tax planning asks: Where’s the line, what’s my risk, and is the benefit worth it?
Ask Yourself:
Where’s the line, what’s my risk, and is the benefit worth it?
Playbook: Legal, Under‑Used Tax Strategies That Actually Work
Important: None of this is advice for your specific situation. Talk to a pro who will document the business purpose, price at fair market value, and keep clean records.1) The Augusta Rule (14 Days, Tax‑Free)
Rent your primary residence to your business for up to 14 days per year at fair market value and:
Your business deducts the rent.
You personally don’t report the income (under current interpretations of case law).
Pro tips:
Support your rate with nearby Airbnb/VRBO comps (seasonality matters—Masters Week vs. August in Augusta are not the same rate).
Keep an agenda and evidence your home actually hosted a legitimate business function (strategic offsite, content shoot, board meeting, etc.).
2) Home Office (Done Like It’s 2025)
If you earn self‑employment income and use a space regularly and exclusively for business, allocate a share of mortgage/rent, utilities, insurance, and maintenance. In the smartphone era, Gabe often treats phone and internet as fully necessary infrastructure (document your policy).
3) Pay Your Kids—Legitimately
Shift income into a lower bracket by hiring your children for real work your business needs (e.g., modeling for marketing, content assisting, product shots, hosting, age‑appropriate clerical tasks).
How to do it right:
Use a written agreement (e.g., a modeling or services contract) signed by the business and the guardian.
Track time and tasks; pay market rates for similar work.
Consider contributing their wages to a Roth IRA to strengthen the position and build long‑term wealth.
4) Depreciation & Cost Segregation (Without the Tax Trap)
Bonus depreciation and cost seg can supercharge deductions—but beware depreciation recapture when you sell or trade a vehicle or asset with low or zero basis. Many “year‑end truck” purchases simply trade $1 for 20–37¢ of tax savings and create future income on disposal.
Better: Use cost segregation studies on real estate and attach the report with your return. It signals to screeners that you did the work.
5) Don’t Let the Tax Tail Wag the Investment Dog
If you need deductions, invest—don’t just spend. For the right investors and deals, sectors like oil & gas can create active losses (via intangible drilling costs) that offset W‑2 income. But only if the underlying investment is sound. Same mindset applies to short‑term rental strategies that meet material participation.
W‑2 High Earners: Options Beyond “Max the 401(k)”
If you’re a surgeon, attorney, or engineer earning $300k–$1M+ on a W‑2, the goal is to create or access active losses or defer income:
Oil & Gas (IDC focus): Potential active deductions when structured correctly.
Short‑Term Rentals: If you (not a manager) meet material participation tests, losses may offset active income.
Charitable Strategies: Stack timing, appreciated assets, donor‑advised funds, and vetted advanced structures that can multiply deductions (work with specialists).
Side Businesses: A legitimate, profitable enterprise can open doors to planning otherwise unavailable to pure W‑2 earners.
Heads‑up:
The $600,000 excess business loss cap and AMT can limit how much of those losses you use in a single year. Model it.
What Actually Triggers Audits Right Now
According to Gabe, with staffing constrained, the IRS is emphasizing materiality over minutiae:
Large bonus depreciation or unusually high depreciation relative to revenue.
Active losses flowing from K‑1s that offset high W‑2 income.
Hot‑button shelters: Syndicated conservation easements, micro‑captives (specialized teams review these).
Reduce your profile: Attach third‑party reports (e.g., cost seg), keep a coherent narrative, and maintain clean, contemporaneous records. Many audits are won on organization alone.
When to Stop DIY’ing Your Taxes
If your return is more than data entry—or you feel stress about what you’re filing—it’s time to hire a pro. The value isn’t just in keystrokes; it’s in knowing where to knock so you don’t create problems that surface years later.
Work With Gabe
Gabe’s boutique, relationship‑driven firm: Palmettos & Prickly Pears Tax Filing & Advisory, handles:
Flat‑rate individual and business returns
Ongoing planning/consulting retainers for complex situations (M&A, alternative investments, real estate)
Representation in audits and appeals
Personal note from the host:
”I’ve worked with standard CPA firms and with Gabe. There’s a big difference when your tax pro plays offense.”
Compliance & Common‑Sense Disclaimer: This article is for educational purposes. Tax law changes, facts matter, and aggressive strategies require meticulous documentation. Talk to a qualified professional before implementing anything.