I believe that they will run afoul of the tax provision that disallows any and all deductions arising from transactions not entered into with expectation of profit. Folks who have tried to use Amway to convert personal expenses into tax deductions have often incurred difficulty with this provision of the tax law. The number of tax audits conducted has dropped sharply as the IRS s budget has been slashed over the last few years. The Tax People is a dubious organization that brings out the worst in taxpayers. However, its existence points out a problem in our tax system.
Taxes are too high.
As long as people feel that their taxes are too high, they will be tempted to resort to scams to achieve a better tax comfort level. In my view, our system of federal taxation works backwards. Under the current scenario, we authorize Congress to spend as much as it wants and adjust our tax rates accordingly. Of course the adjustment is always upward and always will be as long as this biscuit is dangled in front of a starving dog. A fair amount of the blame falls on us too.