Get Corporate Tax Shelter Registration - Uncle Fed's Tax *Board

Updated on December 3, 2022. Written by Amelia Josephson. A tax shelter is a place to put your money where it will be safe from the long arm of the Tax Man. Many people think of tax shelters negatively, but they are completely legal and legitimate ways to decrease your taxable income.

A tax shelter is also any legal strategy you employ to reduce the amount of income taxes you owe. Claiming deductions is a perfectly legal way to reduce the amount of income tax you pay to the IRS. You can easily accomplish this tax shelter by choosing to spend your income on expenses that can lead to a deduction.

Not surprisingly, partnerships and other entities are considered a tax shelter if a significant purpose is the avoidance or evasion of federal income tax. It also encompasses certain entities (other than C corporations) for which the offering of their securities is subject to federal or state registration.

The registration number of the tax shelter must be provided to the five customers treated as investors in the tax shelter, but would not be required to be furnished to the customers whose principal active trade or business is reasonably expected to be farming.

Qualified retirement accounts, certain insurance products, partnerships, municipal bonds, and real estate investments are all examples of potential tax shelters.

This plan works like other retirement plans—employees can contribute a certain portion of their annual salaries up to a certain amount each year. These contributions are made on a pre-tax basis. Earnings grow tax-free, which means they aren't taxed until the plan owner begins making withdrawals during retirement.

While there are plenty of completely legitimate and credible forms of tax shelters, many individuals and tax scammers use tax shelters to illegally lower their tax liability. Any tax shelter that is used solely for the purpose of lowering tax liability is considered abusive.

Tax shelters are ways individuals and corporations reduce their tax liability. Shelters range from employer-sponsored 401(k) programs to overseas bank accounts. The phrase “tax shelter” is often used as a pejorative term, but a tax shelter can be a legal way to reduce tax liabilities.