Being Careful to Choose Legal Tax Shelters

There are some types of corporations that try to find loopholes in the tax laws that allow them to get out of paying such high taxes.  There are some companies that look for tax shelters, which are ways to reduce the amount of income that is available for the government to tax.  There are many different tax shelters that are legal to use and corporations use them regularly.  However, there are others that are not legal and have caused some corporations to get into a lot of trouble over recent years.  In light of this, corporations need to make sure that they have a group of tax attorneys that are well versed in the use of tax shelters so that the company can avoid operating illegally which lead so fines, as well as jail time in some cases for the executives that are involved in the cover-up.

IRS

Most companies are audited every few years to make sure that the financial records match what they are reporting to the federal government.  This is why corporations have to hire such good accountants and tax attorneys, because an auditing process is very labor intensive and paperwork intensive, so the more everything is in order and questions can be answered promptly, the better for the company.  When a company uses a lot of tax shelters they are even more closely watched by the federal government to make sure that the tax shelters are not a scam.  When these are used illegally, then the government considers it tax evasion, and it costs the government a lot of money in revenue.

There are several types of legitimate tax shelters that individuals and businesses can use to try and lower their taxable income.  Some of these are in the form of retirement accounts which the government does not tax very heavily.  Another popular way to lower the income that can be taxed is to invest in real estate, since that will lower the taxes while still keeping the net worth of the individual.  In addition, individuals can get a tax break by setting up their own business, by buying into IRA’s or municipal bonds, and also through various pension plans that can be obtained.  Most of these ideas help individuals to be able to access the money if it is needed, but often allows them to withdraw with a lesser penalty and tax deduction than if the money was invested in some other way.  There is also the ability for individuals to obtain health coverage and life insurance through their employers which allows the money to come out before it is taxed.

Why Do We Pay Taxes?

As Benjamin Franklin famously said, nothing is certain except death and taxes. But where do taxes come from, and do we really need them?

A History of Taxes

The first recorded use of taxation was in ancient Egypt. The Book of Genesis reports that a share (20%) of all crops was given to Pharaoh. In modern times, taxes first began to appear in Europe in the early 17th century. The great powers of Europe, back in the days when Europe actually mattered, exported their taxation policy to their colonies in the New World.

1n what later became the United States, the Stamp Act of 1765 famously kick started the American revolution. “No taxation without representation” became the rallying cry for both the American rebels and their supporters back in the United Kingdom, some of whom hoped that the British would follow the Americans’ lead in throwing off the tyranny of Mad King George.

For a long time, federal income taxes were believed to be unconstitutional, but the Sixteenth Amendment to the Constitution granted the federal government the right to levy income taxes. However, Americans retain a long-standing hostility to taxation.

Resistance to Taxes

Communists and Libertarians may not share much in common, but one thing that unites them is a mutual distrust of taxation as a means of raising revenue. Karl Marx predicted that personal income taxes would disappear in a communist society as government ownership of businesses replaced them as a revenue source.

On the right of the political spectrum, libertarians and objectivists regard taxation as a form of slavery, or at least aggression by the government. Anarcho-capitalists argue that there is no moral difference between a criminal robbing a man of $50 and that same criminal voting for a politician who will tax the man that $50 and redistributing it to him in the form of welfare payments.

Most people, however, regard taxes as a payment for services rendered. Oliver Wendell Holmes said that “Tax is the price we pay for a civilized society”, while Cicero called them “the sinews of society”. There are various proposals for reform of the tax system. Proponents of the so-called “fair tax” include former presidential candidates Mike Gravel and Mike Huckabee. The fair tax would replace all income taxes with a national sales tax. Opponents of this proposal argue that it would be regressive, placing an undue burden on the poor, a charge denied by its supporters.

Some Eastern European countries have also adopted a flat tax system, with a uniform instead of a progressive rate of income tax. However, economists argue that such a system only works in a small country, though it has its supporters in the major western nations too.

When to Use a Tax Attorney

While most people would not require the use of a tax attorney, those who own their own businesses or who have a multitude of assets are wise to consult a tax attorney in addition to the accountant that they use to make sure that they have covered all of the areas that need to be covered for their business or individual life to operate within the bounds of the law, while not taking more of a tax hit then they need to, taking advantage of tax breaks that they might be eligible to use.  Tax attorneys specialize in the laws regarding taxes, especially those laws regarding businesses and corporations, since there are many more legal issues to consider when responsible for paying employees with their withholdings, as well as paying the applicable taxes for the business itself.

Taxes

When a business is getting started, a tax attorney can help that business get all of their financial records in order and also advise them on how to proceed with paying employees and contractors, outsourcing work and other issues significant to a smaller business.  As the business grows, these tax attorneys are also helpful in recommending different changes to the structure of the organization so that they can pay the least amount of taxes each year to the government.  Accountants are also very valuable, but are usually responsible more for the day to day financial concerns of the business as well as keeping the records straight for the end of the year taxes.  The tax attorney is one more means of oversight for the business to make sure everything is handled in a legal manner so that the Internal Revenue Service does not find a problem and hit the business with a lot of fees and late taxes.

A tax attorney is also useful when the business gets audited, which will happen with any business, usually on a fairly regular basis during the course of that business or corporation’s life.  An audit, although time consuming and paperwork intensive, is not something to fear when a business has a good tax attorney on the payroll, because between the attorney and the accountant, the paperwork should all be readily available and in order so that the auditors can find what they need and get all questions answered to their satisfaction.  Corporations and conglomerates need even more help from a tax attorney and usually have a group of tax attorneys working for them to handle all the different aspects of the corporation and make sure all legal issues are covered.

How Will You Spend Your Tax Refund?

Taxes – everybody hates them. The government takes from your paycheck every week, and it can be frustrating to see how much they get right off the top. Some of that you’ll never see again, but your federal and state taxes might be refunded to you (or at least a portion of them) if you’ve had more than you should have taken out. If you’re one of the lucky ones who gets a refund after you file your taxes, you get to decide how to spend the money! Isn’t that great?

First Things First

Some people like getting a tax refund – it feels like a freebie when the government gives you a check. But people often forget that the money the government is sending you is your own money, which they’ve borrowed for the year, interest free. Many people prefer to have their money in their own bank account to spend as they want all year, not tied up with the government, making them interest. If you got a lot of money back, consider adjusting your withholdings for next year. You might want to set a bit aside in case you guessed too low and end up owing a bit of tax. Consult a tax advisor for more information on figuring out how much you should have withheld during this next year.

Got Bills?

In this tough economy, most of us have bills that we’re struggling to pay. Maybe they are credit cards that have gotten out of hand, or maybe they are just ordinary utility bills that we’ve gotten an extension to pay, waiting for our tax refund to show up to help us cover our obligations. For many of us, this is where our tax refund goes.

Want Toys?

If you don’t want – or need – to spend your tax refund on bills, or you – luckily – don’t even have any needing your attention, maybe you will spend your tax refund on something you’ve been wanting. Maybe you dream of a vacation, or a new piece of furniture for the living room. Perhaps your tax refund is smaller, and instead of going to Hawaii you’ll get to buy a new Hawaiian shirt. Or maybe you and your significant other can go to the movies.

Savings Time?

Some smart souls have their future in mind, and when they get a tax refund they tuck it immediately into some form of savings. Maybe it will be into their savings account at the bank, or maybe they’ll buy a savings bond or add it to their 401K account.

About That Tax Rebate Check…

You’re getting a tax rebate check! Lucky you! I’m sure you’re already planning how to spend it – who wouldn’t? There are plenty of ways to spend it – and a lot of things you can do in the meantime, while you “patiently” wait for it to arrive.

How Will You Spend It?

How you will use your tax rebate check is up to you. No one can tell you the best way i- though there are voices out there on radio and tv telling you what you should do with it.

Some say to reinvest it back into the economy – also known as “buy stuff.” Those who advocate that method believe that spending the money is what we’re “supposed” to do with it – that spending it is best for the economy. You probably have a list already of things you’ve been wanting to buy. Maybe it’s a big screen television, or a blue-ray disk player. Maybe you’ll spend your tax rebate check on a new digital camera, one that is so small it fits easily into a pocket. If your tax rebate check is substantial, maybe you will spend it taking that long-deserved trip to the Galapagos Islands – better make your reservation!

Many major retailers are more than willing to accommodate tax rebate checks – some even offering more store credit than the tax rebate checks are worth, just to entice you into their store.

Some say to take that tax rebate check and put it right into your investment or savings account. In savings, it can grow and develop into more than it was when you put it in, and you will get more benefit that way. Those who advocate this method point out two facts: You might need the money later, better save it now; and You’ve been fine without it to this point, putting in into savings won’t affect your real life much.

Banks and other investment firms are eager for this – many are offering better than normal prices on their savings accounts and certificates of deposit, to encourage you to put your money with them for a while.

Some say to use that tax rebate check to pay off debts – like student loans or credit card debts. Those who advocate this method point out that this “extra money” can help lower your overall debt by as much as you’ll put in, and that your regular payments will be lower from here on out – a real boon.

As for what you should do with your tax rebate check? That’s entirely up to you. Follow the advice of whichever makes the most sense to you – and, in the meantime, play games with your co-workers to guess when that tax rebate check will come!

Should You Do Your Federal Income Tax Return Yourself?

There are many different opinions on whether you should do your federal income tax return yourself. Some people pride themselves on being able to do their own taxes, while others would rather just turn the whole mess over to someone else. But the real question shouldn’t be do you want to do your own federal income tax return, but should you be doing your federal income tax return yourself?

If you’re young, single, without many assets or dependants, than you federal income tax return is probably pretty straightforward, and you should probably be alright doing our taxes yourself. As you get further along in your adult life and get married, have kids, buy a house or start investing, your taxes will become more difficult, making it harder to do them yourself properly.

So, if you file jointly with your spouse, have dependents, own property, have investments, or any or all of the above, then it might be a smart choice to get someone to help you with your federal income tax return. You might be paying money needlessly to the IRS because you don’t know all of the deductions that are available to you.

The more complex your financial situation, the more you need a good tax service to help you with your federal income tax return. Look for a company that has years of experience, offers a refund policy (this means they stand behind their work), and is completely transparent when it comes to their fee structure; those that don’t are trying to hide something.

If you need a recommendation for a good company to help you with your federal income tax return, check out the Tax Defense Network. They have over 50 years of combined experience in all areas of tax help, and they can help you make sure that you’re doing your taxes right.

Where Can You Get Answers To Your Tax Questions?

Taxes are an unfortunate part of our lives. But our tax money finances so many parts of our government, taxes are here to stay. It would be nice if taxes were cut and dried, easy to understand and easy to pay. But, generally speaking, that’s not the case. Many of us have tax questions. We need to know where to turn when we aren’t sure what we’re doing when we file our taxes. While it may be tempting to ask your co-worker, your neighbor, or your mother, the information or advice you get from them may not be accurate – unless they’re a Certified Public Accountant or a Certified Tax Preparer. But there are other, more reliable sources of information available.

Easiest Tax Questions

For your easiest tax questions, you can usually find the answer by reading the materials published by the Internal Revenue Service. Their publications can be found online, or can be requested by mail, or found at post offices, libraries, and other locations.

The Internal Revenue Service maintains a detailed site online. There, you can find and print all tax forms, along with the instruction booklets. (If you don’t want to print them out, since many are very long, you can read them online.) The most common tax questions are answered in the answer base on their site. Check there first for the answer to your tax question.

More Complex Tax Questions

For questions affecting your taxes that are more tricky to answer, you can ask a certified tax professional. They are trained to prepare taxes and keep up-to-date on the changes in the tax code from year to year. Many times they will hold events where they answer anyones tax questions for free. Consider calling a local tax professional or two to ask when such an event is planned.

Tax Questions Before Taking Action

Some financial decisions will greatly affect your taxes. If you have a complicated question, like the effect of certain actions – buying or selling property, investments, dividends, etc.,  it might be best answered by a Certified Public Accountant experienced in tax preparation. Things that have to do with capital gains, which education credits to claim when, etc., are much more personal and may require an in depth look at your own situation.

Special Services

If you fit some specific groups, there are events available where tax preparers will help with your taxes for free or very low cost. Some of the groups that are often targeted for these special services are the elderly and recent immigrants who need help because of a lack of English ability. These events are publicized regularly from the beginning of a new year until tax day.

Going To The Tax Man

The Internal Revenue Service has a toll-free number that you can call to talk to I.R.S. Representatives who are specifically paid to answer tax questions. It is an option – though it is less useful on complex tax questions. If you call them, it is a good idea to also check with another source of information, like the suggestions above.

Sources Of Tax Deductions

Taxes are expensive! And though we don’t mind paying “our fair share,” everyone is happy when they find a way to reduce their taxes. One of the simplest ways to reduce the taxes you will owe is to have items that qualify for tax deductions. As long as you

Donating To A Charity

Donations to established non-profit organizations qualify for a tax deduction. Be sure to get a receipt for your donation in case you are ever audited. It needs to state the name and address of the organization, what you donated (money, items, car, etc.) and the value that the company claimed for it. If you donate thrift store value items at a place that has no representative standing by to give you a receipt, write up specifically what you donated, the date, and the number of the drop-box if there is one, or the location of it.

Donations can be in cash or as items to be sold or used for the less-fortunate, like clothing, toys, shoes, blankets, etc. They can also be “boats, cars, RVs” as we’ve heard on the radio. These companies take your vehicle and give you the Blue Book value for their vehicle, either all as a tax deduction, or sometimes half in cash. Sometimes you can designate to which organization you want your contribution to go – whether the American Heart Association, the Federation for the Blind, La Leche League, or another qualified non-profit organization.

Medical Expenses

Some medical expenses qualify as tax deductions. Be sure to keep track of them throughout the year, retaining receipts for doctor visits, prescription medicines, and other qualifying items. All of these can be added together to go on your tax deduction form.

Child Care Expenses

Child care can be a very expensive, ongoing, expense. If you’re a parent of young children, unless you have a willing parent who doesn’t mind being on “grandma duty” every time you need it, you will likely have child care expenses. Most child care expenses are for when the parents are at work, and will be in the form of a day care (whether in an in-home or freestanding day-care facility) or an after-school program.

Business Expenses

Some business expenses qualify for a tax deduction. You should be keeping track of all business expenses as a regular course of business, anyhow. Fortunately, some of them will help you pay less taxes overall.

Check with your tax preparation advisor to know which of these deductions will be applicable in your personal situation, as well as how to maximize their use.

Preparing Ahead For A Pleasant Tax Day

How did you spend your last tax day? In line at a post office at almost midnight, dropping off your taxes? Dreading going on an extension again – knowing if you owe and don’t pay it on time, there will be penalties, but having no idea how much you need to send now?

April the 15th comes around every year. We all know it. We all hate it. We all know what we can do to not hate it so much – but do we do it? Let’s take a look at some practical things you can do to make tax day a day of relaxation – since your taxes were sent in already.

Plan Ahead – Information Gathering

When things come to you in the mail that are pertinent to your taxes, do you file them away carefully in one place so that you can find them when it is time? For example, your W2’s, investment or banking information, tax forms and booklets – these are all important to be able to take with you to the CPA, or to the tax preparer, or to the kitchen table if you do your taxes yourself. Plan ahead – keep these mailed items in one place.

A Year Ahead? You’ve Got To Be Kidding!

Now that you’ve got a file folder for the stuff that arrived in January, be a little more ambitious for next year. Tax day will be smoother if you’ve been keeping all tax pertinent stuff in one spot all year long.

For example, your charitable contribution slips should be kept together. If you are filing a regular 1040, you will be able to itemize deductions – and for many people, charitable contributions is a major deduction. Whether those contributions came in the form of money into the collection plate at church or clothing and shoes donated to the local thrift shop, there are established ways to document your donation. Be sure you are keeping whatever records are needed to substantiate your donations.
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You also need to keep track of your medical expenses. Doctor co-pays, prescription medicine, light treatments for your psoriasis – all count toward your medical deduction. Keep track of them.

Many of your business expenses will also be needed. Keep that information divided into the categories for tax purposes. And your childcare expense receipts – and education expenses. There are many things that need to have documentation if you don’t want to be audited after tax day. Audits are best avoided at all costs – so no making up numbers for your taxes!

Call Your Tax Preparer Early

If you have someone help with your taxes, call them well before tax day. They will have more time to complete your taxes accurately, and you won’t be nearly as stressed.

Enjoy Tax Day!

There Are Ways You Can Get Back Tax Relief

If you’re behind in your previous year’s taxes, or if you haven’t filed for several years, you may be looking for ways to get back tax relief. Don’t worry, there are things that you can do.

Unfortunately, you have to realize that, even if you get some back tax relief, you most likely will still have to pay the IRS something. How much you have to pay depends on your individual circumstances. Disposable income, any assets you might have, and your employment and health circumstances will all affect the amount of back tax relief that you get.

There are several ways that you can get back tax relief from the IRS. The one most people have heard of, but actually very few qualify for, is the so-called ‘pennies on the dollar’ method that so many companies advertise. This is actually the Offer in Compromise Program with the IRS. If you qualify according to their specifications, you can settle with the IRS for a lesser amount than the back taxes that you owe.

But only a small amount of people qualify for the OIC program; the rest of us need to find another way to get back tax relief. Other options for back tax relief, if the OIC program is not right for your particular case, are an installment agreement, where you agree to pay a certain amount over a longer course of time, a ‘currently not collective’ status if you are under immediate and dire financial circumstances (but you will need to pay at a later date) or a penalty abatement, where you will still need to the original amount you owe, but the IRS takes off the amount you’ve incurred in penalties.

So you shouldn’t think that you don’t have back tax relief options. The problem most people have is that they don’t know the language that the IRS uses, or any of the obscure rules. If you know the rules, you can find the loopholes that will help you get some back tax relief. In many cases, your best bet is to find a reputable firm that can help you with your IRS problems.

Click Here Now to Check Out the Tax Defenders Network and get Your free consultation about which method of back tax relief can help you.

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