Tax Evasion-What Not to Do

Tax Evasion-What Not to Do. When the federal government couldn’t put together criminal charges on Al Capone, tax evasion brought him down. While he’s probably the most notorious tax evader, plenty of other high-profile tax evaders saw their days in court, too.

Tax Evasion-What Not to Do. Image of Scrabble pieces spelling Tax Law with a gray background and handcuffs.
Tax Law-What Not to Do
What Not to Do

Every so often, celebrities will make the headlines for massive tax evasion and tax fraud criminal cases. They often face time in prison and fines running into the tens of millions.

While you may not make gangster or celebrity-level income, choosing to avoid paying your taxes can land you in similar hot water with the IRS. I cannot stress enough that if you choose to “forget” to pay your taxes, the IRS will eventually find you.

Tax Evasion-What Not to Do. Image of an empty court room.
Tax Minimization Methods

Don’t try to ignore or run away from your tax liabilities. Instead, work with a tax professional to use many different tactics to minimize your taxes legally. Here’s just a short list of examples:

1. Municipal Bonds

When you purchase municipal securities you are in effect loaning a state or local government money for capital expenditures, the interest they pay are tax exempt for most taxpayers.

2. Max-out Retirement Accounts and Employee Benefits

Contributing to a workplace 401(k) or 403(b) plan does more than help solidify your nest egg for retirement. As of 2022, you can contribute up to $20,500 ($27,000 for those 50 and older) and reduce your taxable income.

3. Use a Health Savings Plan

If you use a high-deductible health insurance place, you can reduce your taxes with a health savings account (HSA). For 2022, individuals can contribute up to $3,600 a year ($7,300 for families) that are 100% tax deductible.

4. Claim Every Legal Tax Credit

Depending on your situation and income levels, you can claim credits for a lot of different expenses, including:

Earned Income (depending on income levels and number of children)

American Opportunity Tax Credit (during first four years of a student’s postsecondary education)

Saver’s Credit (depending on income levels and retirement contributions)

Child and Dependent Care Credit (depending on income levels and qualified expenses for the care of children and disabled dependents)

Quarterly Tax Payments

If you own a business or have Self-employment income, paying estimated quarterly taxes should become part of your operations. Anyone with rental property income or investments may also need to pay estimated quarterly taxes, even if the employer withholds taxes from their paychecks.

If you wait until the end of the year, you’ll likely have to face a massive bill. Not only that, but you may also face penalties for late payment on those quarterlies. Overestimating or underestimated earnings can get complicated, especially with the IRS wanting specifics forms for different scenarios.

Using Trusted Tax Professionals

All these options come with their own complications, which is why we recommend working with a trusted tax professional. Experts like those in our office can help you stay on the right side of the law. And we’ll ensure you pay the lowest possible taxes for your personal or business income. Additionally, follow along with our Tax Evasion-What Not to Do blog to stay on the up and up.

Schedule a consultation with our office at 724-216-0704 or use our online form.

Will You Find Yourself in a New Tax Bracket in 2023?

Will You Find Yourself in a New Tax Bracket in 2023? A few weeks ago, our friends at the IRS released their tax adjustments for 2023. (Feeling brave? You can check out the full report on their website.) Every year the IRS adjusts the taxable income brackets for inflation. As you can imagine, this year has seen a tremendous bump based on major spike inflation. And likely your income did not receive an equivalent bump, which could impact your current bracket.

Will You Find Yourself in a New Tax Bracket in 2023?
Why Brackets Matter

The IRS doesn’t charge taxpayers a flat rate. Instead, the United States operates on a progressive system using seven brackets, 10%, 12%, 22%, 24%, 32%, 35%, and 37%. People with lower taxable incomes pay lower federal income tax rates. Additionally, those with higher taxable income pay a higher tax rate.

But whichever tax bracket you find yourself in, you don’t pay that percentage on your full taxable income. Instead, the IRS divides your income in chunks and each chunk gets taxed at the corresponding bracket rate. Nerd Wallet does a great job of breaking this down in comparable charts.

When the IRS raises their tax bracket limits, more of your income gets taxed at the lower tax rates. The government designed the annual realignment to avoid “tax bracket creep” where incomes get pushed into higher brackets with inflation.

A worn yellow pencils sitting on tax forms. Tax brackets, tax law, tax preparation, and resolving tax issues. Will You Find Yourself in a New Tax Bracket in 2023?
What Else Impacts Your Tax Bill?

Tax bracket adjustments aren’t the only thing that help you save money on your taxes. Also, every year, you can save money by taking advantage of applicable tax credits and tax deductions.

Tax credits won’t affect your bracket, but they reduce your taxes owed dollar for dollar. Tax deductions, whether itemized or standard, reduce your overall taxable income. By reducing your taxable income, you could fall into a lower bracket and pay a lower tax rate.

The Takeaway

Ultimately, you could see your paycheck increase in 2023 from the lower rates. At the same time, you may also find your tax bill at the end of year lower. As a reminder, though, you won’t feel those tax bill breaks until you file your 2023 taxes in April 2024.

Confused or overwhelmed? Relax! Our office provides tax return preparation services for businesses of all sizes and individuals. As we walk you through the process, we make sure you understand every step of the way. Because with our experience, we find every tax deduction we can to ensure you pay the lowest possible tax rate.

See how we can help minimize your tax responsibilities by calling our office at 724-216-5180 or contact us using our online form.

Will You Find Yourself in a New Tax Bracket in 2023? Image of the John A. Cochran, Esq red and white business card and tax forms.

Avoid Three Common Problems to Minimize Tax Pains

This winter you can avoid three common problems to minimize tax pains that will make tax time easier and quicker. While gorging on your kids’ candy and sipping a pumpkin spice latte, you probably don’t have taxes on your mind. But maybe you should. Individuals and business owners alike handle tax season much better when they prepare. Year over year, we see tax filers ensnared in easily avoidable pitfalls.

Avoid Three Common Problems to Minimize Tax Pains.
A black and yellow Caution sign that reads Caution: Tax Due Dates Are Closer Than They Appear.
Tax due dates will be here sooner than you think.
1. If You Don’t Have a Record of It, Don’t Try to Claim It

Maybe you legitimately paid for a new business computer but cannot find the receipt. You can always find the sales record somewhere. For example, you can check the card statement you used to purchase the item. Often the store itself can give you a copy of your bill of sale.

BUT don’t attempt to claim the personal laptop you bought for your kid for college. We both know that’s not a business expense. Guess what? The IRS will figure that out, too. Make several little “they’ll never notice” claims and you could expose yourself to costly penalties and undermine your creditability in dealing with the IRS.

Other murky areas that can raise red flags include:

Claiming utility costs for a home office (make sure you do it correctly).

Untraceable income to family members.

Lavish gifts.

Other expenses outsized for the level of income generated by a business.

Our advice: Be honest. That keeps you on the right side of an audit. When you have questions, don’t just guess at the answers or listen to some guy at a bar. Instead, ask a tax professional for advice.

2. I’ll Do It Tomorrow

Even if in school you worked “better under pressure” to study or write a paper, remember, taxes take time. You can’t cram for taxes by waiting until the last possible second.

When you wait until the 11th hour, you risk not having everything you need. Scrambling to organize paperwork the second week of April each year turns into risky business. Murphy’s Law will ensure important receipts will vanish or figures won’t add up correctly.

Our advice: Collate your receipts and record them (manually or automatically with software) throughout the year. Entering receipts periodically decreases the chance of losing important paperwork or gives you time to locate or replace lost items.

Bonus: You increase your chances of maximizing your deductions when you have time to consider all possible deductions thoughtfully.

3. Know What You Owe

Ever hear the expression: “you can’t use ignorance as a defense?” Know the full amount of your tax responsibilities. Many taxpayers find themselves in a bind by not being aware of their financial responsibilities.

Instead, go through everything honestly and find out the full extent of your obligations. If you come up shy, we can work out a plan to sort things out with the IRS. Being blissfully unaware does not exempt you and avoiding it will only make things worse.

Likewise, as we mentioned in previous blogs, if you receive a letter from the IRS, do not ignore it! We cannot stress this enough. Avoiding the letters, won’t make the problem go away. It will sit there and accrue more and more fees.

We have good news! You still have enough time to get things together, and we bet it’ll take less time than you think, too. So, deal with the shoebox under your desk, find a lost receipt, and get your paperwork organized.

You also have time to ask questions about allowable deductions and the best way to attack your unique tax situations. We can help. Our experienced tax professionals have helped hundreds of taxpayers just like you. If you can Avoid Three Common Problems to Minimize Tax Pains life will be easier come tax time! Contact our office at 724-216-5180 or use our online form to learn more.

Avoid Three Common Problems to Minimize Tax Pains. 
An image of the red and white John A. Cochran, Esq. business card with tax forms.