Tax Lawyer

Helping keep you accountable.

What are the types of tax planning law?

Tax fraud and tax disputes

Examples of tax fraud can be not reporting income, falsifying one’s social security number, or falsifying deductions. When filing taxes, taxpayers are legally bound to report all details from the year. Examples of tax fraud on an individual level might be:

• Not filing one’s income on a tax return
• Knowingly not paying a tax debt to the IRS
• Not reporting all income from the year
• Intentionally filing a false tax return
• Falsely claiming tax credits
• Not reporting cash payments
• Not reporting all payroll
• Not reporting withheld payroll taxes
• Failure of withholding Federal Income Tax

Tax fraud can be a serious offense. It is defined as knowingly falsifying information on a tax return in order to avoid being taxed as much money or avoiding paying a certain amount of money to the IRS at the end of the year. Many who are faced with tax fraud allegations run the risk of facing extreme fines and possible jail time. A tax attorney will be able to assist in tax fraud allegations or tax disputes between businesses.

There is a difference between tax fraud versus tax negligence. There is also what is known as tax avoidance. Tax avoidance is much trickier to spot because a person typically uses legal resources to lower their tax payments. If a person or business is truly unaware that they have made an error, it is highly encouraged to consult a tax attorney to help your case. Dealing with the IRS can be a tedious process. A lawyer can help not only mediate the situation but help you avoid having to pay high penalty fees, as well as fight any legal issues that may result, on your behalf.

Tax Planning

Tax planning during the year is extremely important to help avoid having to pay high tax fees when the year is over. Because the process of planning taxes is time-consuming, there are a few steps you can take to simplify the situation:

Knowing whether to take a standard deduction – When filing taxes, there is the choice between an itemized deduction or a standard deduction. The standard deduction dollar amount differs depending upon whether you are filing jointly or separately. Taking a standard deduction (if know debts or mortgage payments are at play) simplifies the situation and creates for less hassle.

Budgeting – Federal and state income taxes are required to be deducted from every employee’s paycheck. Especially for young adults, when a first paycheck is received and the amount is much lower than expected, this can come as quite a shock. All paychecks list these deductions in an itemized manner. It is important to map out your bills and monthly finances in order to ensure being able to afford all expenses, along with being able to save for any taxes that might be owed at the end of the year.

Getting an early start – Because many do not like to deal with the tedious work and time it takes in filing taxes, most will wait until the last minute. It is important to start before the end of the year with tax planning to avoid a high tax bill. Knowing your yearly gains and losses will help to give you a better idea of where you will fall within the tax bracket. If you are expected to gain money from a large investment, you can expect that your tax amount is going to be higher. If you are not expecting a large investment or higher income, you can expect your tax amount to be lower. It is important to map out and prepare for these scenarios to better keep your finances in order and to lessen the “blow” at the end of the year.

Knowing the tax deduction requirements – It is important to know the tax deduction requirements. Knowing these can ultimately save you interest. In certain scenarios, if you take out a loan, you will be able to deduct from the interest. On a credit card, you cannot deduct from the interest. When deducting interest from a loan, it will depend on what the loan is being used for. For example, if a person takes out a student loan, the person may be eligible to deduct from the interest that accrues because the loan is being used for educational purposes.

Knowing the difference between tax deductions and tax credits. – It is important to know the difference between tax deductions and tax credits. Tax deductions aren’t exactly negative but having tax credits can be considered a positive. If your tax credit is valued at a certain amount, your tax bill will also be lowered by that amount.

Knowing tax deductions and credits – It is important to be aware of tax deductions and credits. If you are able to plan in advance how much of your income may be reduced due to tax deductions, as well as how much you will owe in terms of tax credits, this could help greatly in financial planning, along with possibly reducing your tax bill.

Planning when tax payments will be required – Unless you are self-employed, your employer will withhold taxes from your paycheck, and you are paying these taxes out of your full paycheck monthly. For those who are self-employed, this can prove to be trickier. You may need to map out if you owe any estimated taxes from anything that was not subject to being withheld, along with if you in fact need to pay any estimated taxes. The best way is to pay your taxes as you go, that way you will avoid being subjected to possible penalty fees.

Holdings – Putting money into tax-advantaged holdings can significantly lower your tax bill. There are many different types of holdings that could prove to be beneficial for your needs. There are two types of tax-advantaged accounts: tax-deferred investment accounts and after-tax investment accounts. Tax-deferred investment accounts help to delay taxes on investments to a later date. This can prove to be extremely beneficial because payments are not usually due until years in advance. After-tax investment accounts allow you not to pay taxes on investments. This is due to various taxes that have already been paid. When it comes to choosing which plan might be best for you, this will all be dependent on your monthly income and financial goals for the future. Some of these types of plans might include retirement accounts, educational savings accounts, health savings accounts, etc. If you are unsure of which plan would work best for you, consult with a financial advisor. A financial advisor can help you determine which type of tax holdings account would best fit your financial goals.