Nothing is certain in life except death and taxes. This adage reflects most people’s acceptance of the inevitability of paying taxes. While paying taxes is a civic duty for anyone with a regular source of income, it also doubles up as a legal requirement.
Gleaning from law firms such as Geoffrey C. Dietrich, withholding money from the government could land you in deep legal trouble with the IRS. The federal government uses the funds remitted by taxpayers to fund its activities. As such, the government will go the extra mile to hunt people who fail to declare income and pay taxes.
Don’t Evade Taxes
Taxation in the United States follows a progressive scale of income with the rates ranging from 10 to 37 percent. People in higher income brackets are saddled with higher tax rates. The prospects of the government taking a considerable chunk of their hard-earned money often make some people uneasy. To this end, they tend to find ways to under-report their income.
In most cases, this entails failing to declare self-employment, moving money between accounts, and failing to report overseas income. In other cases, people declare too many dependents, falsify charitable donations, or claim too many deductions and work expenses. While such tactics work for a little while, the IRS will eventually discover the truth since there’s a discrepancy between your declared taxes and your bank deposits.
Withholding taxable income from the IRS is a serious crime that is punishable by law. The severity of the punishment can range from a slap on the hand to spending time behind bars. Surprisingly, the IRS is open to letting you amend your returns and keep current with taxes if you choose to cooperate. However, that is only in instances where you willfully withheld declaring assets such as an overseas bank account.
Criminal tax evasion is a tad more severe and carries stiff penalties. In addition to the paying the tax balance, the taxman might impose a penalty as high as 75 percent of the balanced owed. Other forms of punishment include wage garnishment, property, and bank account seizures or forgoing tax credits and returns. In some extreme cases, you might have your property seized and still spend a year or more in jail.
Avoid Paying Taxes Legally
If you’re adamant on not paying a fortune in taxes, there are numerous ways to achieve this feat without getting on the wrong side of the law. As a way to reduce cheating on taxes, the IRS purposely creates several loopholes that you can exploit to lower your tax obligations. For business, this might entail building employer retirement plans among other tax shields. For individuals, this can involve deducting a charity donation or putting money into a retirement account such as 401(k).
Like it or not, taxes are a reality that you have to contend with every time you make some income. Failing to meet your tax obligation can saddle you with unwanted legal troubles. Rather than tempting fate, you’re better off retaining the services of a credible expert to lower your tax obligations without running afoul of the law.