Some of the Most Common Tax Mistakes

Are you sure that you are paying correct amount of taxes? If yes, you must be availing every IRS relief option for you are eligible. In case, you are not sure about that, you should get in touch with your tax preparer at the earliest. It could be possible that you find your tax professional has not employed some of the tax break option for which you were very much eligible. But tax relief is not the only thing that could minimize the amount of taxes you are paying. There are several other things that could cost your thousands of dollars, if you don’t make use of them.

First thing that you should take care of is to refrain from excess of self employment tax. Most of the businessmen tend to pay as much self employment tax as income tax. If you belong to the same clan, you should consider setting up an S corporation to reduce your tax liabilities. For businesses with sole proprietorship and it is an S corporation, you would need to report your net income on schedule c and this kind of corporation will get taxed like a partnership. In other words, you can split the owner’s income in two parts: pass through distributions and wages.

Another mistake that most of the taxpayers make is when they receive IRS’ notice for audit. You should not scared or get panic after receiving the notice rather you should understand the fact that there might be some issue with your tax filing that’s why you’ve received notice for audit. According to experts, the chance of getting into the cage of tax audit is just one to two percent and IRS targets mainly those people who have filed earned income tax, small businesses, sole proprietorship and business related to cash industry such as coin operated Laundromats, pizza and ice cream parlors. If you want minimize your tax responsibility, make sure you are not missing family employment.

According to the US tax law, you can avail deduction for 7 years old kid. Do you own unincorporated business? If yes, then you don’t need to withhold the Social security of your kids until they turn 18. Therefore, it is completely tax free money. Employ your family members and pay them reasonable salary according to the tasks they perform. Employing your family members is not only about hiring and paying them, if you want to minimize your tax responsibility legitimately, you should keep a time sheet and define their job description as well.

Medical expenses are another thing that some of the taxpayers neglect and need to pay excess tax. You should be a part of employee benefit plan known as MERP (Medical expense Reimbursement plan). With this plan you can write off almost every medical bill that you have paid for. You should hire an experienced tax attorney who can make you aware about the valuable tax saving strategies.