American citizens duty, we all have a legal and, some would say, moral obligation to pay to our government. At the same time, we have a right (and an obligation to ourselves) to cut as much as is legally possible.
The rich (those with access to the best advice money can buy)
know that a tax dollar not spent is, in reality, better than a dollar earned, for a dollar not spent on t-x is worth 100 cents while an earned dollar is worth only 100 cents minus your effective rate.
This section, then, is all about saving dollars legally...the way the rich do it, by taking advantage of every loophole, break available.
even before we start
This nation's law is being constantly revised...it was in fact, revised five times in the past decade. The revisions are so constant that the law's name itself was changed to the "Internal Revenue Code of 1986" - with the clear implication that there will be a other codes to follow.
As a result, it's almost impossible for non-professionals (and even for many accountants) to keep abreast of all the changes in the law; yet, since you'll file about 50 times in your life, you have to try. What are you to do?
First, start with MnyTips.com and make use of its money saving ideas.
Then, use any one of the several good guides published annually right around Jan.-May to update the information you obtain here.
If, however, your situation is complicated, do not attempt to use this site or any other publication as a replacement for a qualified preparer.
Specific information you may not have to file
To be sure, almost everybody has to file -- but there are some Americans (a very limited number) who are able to escape April 15's terrors entirely and also some income that's excluded from taxation.
First, these people need not file based on information as of today.
single people under the age of 65 with income below specific levels
single people over the age of 65 with income of less than $8,750
married people both over age 65 filing a joint return and having total joint income of less than $19,600
a married couple one of whom is 65 or older that is filing a joint return and has joint income of less than $18,550
a married person of any age who is filing a separate return and has income of less than $3,400
a head of household age 65 or older with total income of less than $7,300 or under 65 with income of less than $6,500
a qualified widow or widower age 65 or older with income of less than $7,800
a widow or widower under age 65 with income less than $7,200
The following income is excluded:
Veterans Administration benefits
interest on tax-free securities (other than bearer bonds)
inheritances, life insurance proceeds and bequests (usually not subject to individual income tax)
scholarships and fellowship grants, with certain limitations
workmen's compensation awards, similar payments for federal workers
military allowances, including allowances for uniforms, moving and family seperation
allowance from your employer for child care or care of other dependents
employment agency fees paid by an employer
child-support payments
black lung benefits
payments from a child-placement agency to help you care for a foster or adopted child, so long as payments do not exceed expensee
amounts received to suport volunteer work, such as Foster Grandparents, as well as private, IRS-approved charitable organizations
meals and lodging provided by an employer for the employer's convenience
health insurance and pension plan contributions
casualty insurance proceeds, provided the insurance proceeds are not greater than the amount invested in the damaged property
tuition paid by an employer (one of the most frequently overlooked breaks)
It does no good to keep perfect records and file on time if the information contained in your return is incorrect.
According to the IRS, these are the mistakes its accountants find most often:
Entering the wrong amount. Use the correct table.
Failure to claim head of household status or surviving widow or widower status when qualified.
Failure to claim the proper number of exemptions.
Confusing the amount of income withheld with the amount of Social Security tax withheld. They're two different animals, and two different amounts.
Figuring medical and dental expenses incorrectly. This deduction (becoming more and more difficult to obtain) is based on adjusted gross income (AGI), so that number must be correctly computed before you even begin to figure your deduction.
MIstakes made in figuring child and dependent expenses. Use the IRS form (2441) provided, USE a calculator if you need one, and double-check your math.
Mistakes made in figuring unemployment compensation received. There's a special formula included in your booklet: Use it
Overlooked tax credits. Make sure you read all IRS instructions carefully.
Errors in determining the amount of tax due or any refund due. Carefully check your final figures against the amount of tax withheld or the total of your estimated tax payments. Again, double-check. Errors, believe it or not, do occur in determining total income, especially if more than one 1040 is filed.
Forgetting to sign forms
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