Possibly fearing retaliation by the IRS, many taxpayers do not take advantage of certain available deductions. Taxpayers always have a legal right to take these deductions, without the fear of an IRS audit.
If you’ve already received an audit letter from the IRS, it may be time to speak with a criminal defense attorney.
Unfortunately, the failure to itemize these deductions only results in you paying more to the IRS than is necessary. If you fall into the category of the millions of Americans who are simply not aware that such deductions exist – don’t worry.
7 Examples of Tax Deductions Frequently Missed Include:
1. Charitable contributions: Often we donate personal items to charities without asking for a receipt. Such a receipt can justify taking the deduction on your tax filing to the IRS.
2. Tuition and other educational fees: When working towards a degree, you may be entitled to write such expenses off. This is especially useful for parents putting their children through school.
3. State and local sales tax: This is especially helpful if you live somewhere that does not require paying state income taxes.
4. Earned income credit: For lower income individuals, this credit can result in significant refunds that are potentially worth thousands of dollars. Approximately 20 percent of filers do not take advantage of this credit when available.
5. Job searching expenses: You may deduct costs for a job search, even if the search proves to be unsuccessful.
6. Retirement savings: It’s possible to put money towards retirement while also receiving tax credits.
7. Losses due to gambling: Such losses are deductible, but can never exceed gambling winnings.
Be Careful About Some Deductions
Just as a warning, always be careful when documenting any deductions. Keep as many details as you can, such as a receipt for the transaction. Also, avoid taking any deduction that is questionable.
It’s always a good idea to find a tax law blog which can advise you regarding your various deductions, and the possible ramifications of taking an improper deduction. Plus, the top tax law blogs tend to get updated as new laws around deductions are released.
Legislatures have provided the IRS a tremendous amount of authority to collect taxes. The failure to pay taxes also can result in fines, wage garnishment, forfeiture of property and even imprisonment. What some taxpayers may not know is that the IRS can sometimes come after them regarding another person’s tax liability.
Such an event is possible through something called transferee liability. When an individual receives money or assets for less than the full and fair value from another taxpayer (a transferor), that individual then becomes a transferee. If the taxpayer owed back taxes, the IRS may in turn attempt to collect these taxes from the transferee.
These tax rules are in place to prevent individuals from avoiding paying taxes by transferring assets or income to somebody else. However, the IRS still must abide by a certain criteria put into the tax code before going after the transferee.
According to the U.S. Supreme Court, the IRS must demonstrate that this individual is an actual transferee within the definition of Code Section 6901(h). And if this individual proves to be a transferee, this person must still be “substantively liable” regarding the transfer under the law.
Tax Returns Should Always Be Reviewed by a Tax Professional
Those of you who have that positive, confident, “I got this” attitude. That’s a great attitude to have. If you can file your own personal tax return, good on you. If you can file your own business tax return, you deserve a medal.
However, regardless of your confidence levels, your understanding of the task at hand, or your experience in filing taxes with deductions, there are still plenty of reasons you should have a tax professional review your business tax returns.
If you’re dealing with a simple, straightforward personal return – maybe you really only have your T4 and nothing else to file – you shouldn’t need an accountant. Any accountant will most likely even tell you that.
When it reaches the point where an accountant would be beneficial – or downright necessary – is when you begin to have a larger volume of more complex incomes, expenditures, credits, or deductions, or when you are dealing with self-employment or business taxes.
Always Use a Tax Professional if:
- You own your own business (big or small)
- You are self-employed (Ie: contractor, freelancer, etc.)
- You have purchased or sold real-estate within the tax year
- You have rental property income
- You receive income from commission
- You have made significant investments within the tax year
Filing your taxes is a serious task – and can be an extremely complex one.
Having a professional prepare your return – or even advise you on how to do so yourself – can be well worth the cost through the benefits it can provide.
Someone highly educated on the subject, and with years of valuable experience, such as a qualified tax attorney, is much more likely, than you yourself are, to avoid errors and minimize your owing/maximize your return.
Deduct & File Safely
It’s important to know which types of tax returns require an accountant or a tax attorney. Not only are certain types of returns extremely complicated, and need the expertise and experience of a tax professional, but also, you don’t want to end up having IRS problems. That’s a whole other set of problems no business owner needs.
Don’t Be Afraid to Ask Questions
US taxpayers do need to understand that they have rights when it comes to IRS tax collection efforts such at this. In most circumstances, the IRS must show that the transferor was insolvent in transferee liability cases.
There are also other conditions the IRS must meet before the agency can pursue the transferee. And even if the IRS proves liability, the transferee cannot be liable for more than the value of the assets received.
If you have questions regarding a tax debt, the advice from experienced legal counsel can prove extremely useful.
Entrepreneurs across the U.S. face difficulties in keeping small businesses running. Challenges include filing of tax returns, and taking advantage of deductions.
We’re here to help, so, feel free to reach out with any and all questions you may have!