Yes, there are penalties for errors on your tax return. There are penalties for unsubstantiated income or underreported income and other similar situations. You should not call the IRS, but you should file an amended tax return for that year correcting your errors.
What Is The Difference Between Tax Avoidance And Tax Evasion? Is Tax Avoidance Legal?
Tax avoidance is not illegal; it is a very legal way to determine ways to pay less income tax. For example, making gifts to a qualified charity or putting money in an IRA or 401(k) will postpone taxes on the money that you put into a vehicle. On the other hand, tax evasion is illegal. Tax evasion is when someone deliberately does not report income that he or she makes, especially income that is illegal in the first place.
Is It Legal To Reduce My Tax Burden By Deferring Income Tax By Contributing To An IRA or 401(k) And Claiming Legitimate Tax Deductions Or Credits?
Yes, it is entirely legal. In fact, the government set up the program of IRAs and 401(k)s for that purpose so that younger people could put money into an IRA and not pay tax on it at that time but later on when they retire at 60-65. This allows them to withdraw the money and pay the tax on it at a time when they are probably in a lower tax bracket.
Will Making Charitable Donations Lessen My Tax Burden? Is It Legal?
Yes, charitable donations are deductible. It has to be a donation to a recognized 501(c)(3) organization. For instance, if you give a charitable donation to a community program that is not a 501(c)(3) entity, it is not deductible.
What Are Some Ways Of Legally Diverting Your Money To Lower Your Tax Burden?
There are a few ways to divert your money to lower your tax burden. You can contribute to an employer’s pension plan to postpone taxes on that money; or contribute to an IRA or 401(k), most states have what is called a 529 plan to defer money for college education for your child, and also you can make charitable donations, which are deductible from your taxes.
Do I Still Have To Declare All Assets, Which Were Legally Diverted, To The IRS To Avoid Undue Scrutiny Or False Allegations Of Tax Evasion?
Yes, you do. There are several ways this could be done. If you put your money into a tax shelter, the shelter will report the assets on a 1099 to the government. There are other types of shelters that you can report on your own tax return, but will not pay taxes on.
What Are Penalties For Failing To Declare Taxable Income?
There are several penalties for failing to declare taxable income, and they vary greatly depending on the amount you underreport, and they can vary from 10% to 25%, to even up to double the amount of the tax if it is deliberate. If it’s deliberate, it can be transferred to the criminal system.
What Is The Best Way To Handle Tax Evasion Charges?
If you receive a letter from the criminal division of the IRS stating that you’re being investigated for tax evasion, and signed by a revenue agent, this tells you that the investigation is criminal. You should immediately hire a competent tax attorney who deals with tax issues and go into detail with that attorney as to why you thought what you did was legal. The attorney can then shape that into a form that the IRS can work with.
For more information on Tax Evasion In South Carolina, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 271-7940 today.