We discussed several tax myths in this blog last year. Now that tax time is here again, it’s time to revisit some of the common myths surrounding taxes in the United States. At the law office of Ron Cordova Attorney-at-Law, we understand the desire to limit your tax burden. However, when you and other California residents are too quick to believe some of the falsehoods about taxes currently going around, you may face serious penalties.
If you are like many people in Southern California, your financial assets may extend beyond the United States. You might own property in one or more foreign countries. You might have business investments in another nation. You might even have a bank account in another country. These are some of the situations that might make your tax filings more complicated than those of the average U.S. taxpayer.
California residents are among the most highly taxed persons in the nation. The state has the highest state income tax rate and a sales tax to boot. It is understandable that people in California would take advantage of every opportunity possible to reduce their tax burden. The tax laws are set up to allow and even encourage taxpayers to find ways to lower their tax bills. Yet, there can be a fine line between what some identify as legal use of tax laws and alleged tax evasion. This line might get even murkier under the new tax law.
You may have the same entrepreneurial drive as many in Irvine that compels you to want to be your own boss. Yet the common complaint that our team members here at Ron Cordova Attorney at Law hear from self-employed clients is that they do not understand why they have to pay more in tax. Understanding your tax obligations is vital if you want to succeed at being self-employed, as the threat of penalties from tax improprieties can exact a heavy financial and emotional toll on your business (not to mention endangering your personal freedom).
If you make money from illegal activities, it is crucial that you report it on your annual income tax return. As odd as that might sound, it is true, and attorneys may advise clients to claim that income to avoid tax evasion charges. Remember, tax evasion is how the federal government finally sent 1930s Chicago mob boss and bootlegger Al Capone to prison.
You might think that those charged with tax evasion are people who try to avoid paying taxes altogether. That assumption is shared by in Irvine, as evidenced by the surprise demonstrated by those who come seeking help from us here at Ron Cordova Attorney at Law after having been accused of it. The truth is that many tax evasion charges arise from simple cases of underreporting income. Such issues ca often be traced back to a misunderstanding if a tax form that you might be likely be familiar with (yet not fully comprehend its significance): a 1099.
While it may be tempting to neglect your yearly tax burden, you will face very severe consequences if you choose to do so. California tax payers who avoid or evade paying taxes will be subject to harsh financial penalties and may also be faced with serious criminal charges if the IRS finds evidence of willful tax evasion. MoneyCrashers.com explains the difference between avoidance and evasion and what you can do to avoid serious consequences from being levied.
It should come as no surprise to most Californians that there are a surprising number of myths surrounding the filing of taxes. Tax forms are complicated, and you may have been given false advice by well-meaning friends or associates when it comes to filing your own taxes. It is important to discern the truth before you leave something important out of your tax return or decide not to file at all, or you could face penalties from the Internal Revenue Service.
California residents know that they are some of the most-taxed citizens in the nation making it important for them to understand and use the tax deductions and other tools available to them to avoid paying more than their fair share. While this is something people across the country do and is part and parcel of the system as it is created, there can sometimes be a fine line between what is a legitimate effort to reduce a tax burden and what may lead to criminal charges.
For many self-employed people in California who have multiple clients and are sometimes paid in cash, keeping records for taxes is a hassle. However, according to Chron.com, failing to provide all the information to the IRS at tax time can result in disaster.