Unfortunately, many people make the mistake of assuming that just because they pay their taxes diligently each year they are expert tax payers and know everything there is to know about taxation.
However, au contraire to this popular belief, this is not the case.
The taxes and the filing procedure that will work best for you entirely depend on your specific circumstances, in other word, what is good for one many person may not necessarily work for another.
Because the IRS changes the tax codes and regulation almost each year, there are several laws that are applicable to a specific situation; unless you are a tax attorney or an accountant you cannot possibly keep abreast of all these changes.
To top this confusion, finding out that what you thought was true does not apply any more can be nothing short of painful and not to say that it can also have dire consequences if you followed a law that is not applicable anymore and you under paid your taxes.
On the other hand, you may be paying too much and may realize it too late to even get a refund, unfortunately, too many people follow outdated tax laws blindly; under the perception that they are doing the right thing and throw a lot of money into the IRS coffers.
If you don't want to run into IRS trouble because you are misinformed or are simply not aware of the latest changes to the tax laws; here is some information that may prove vital.
One of the most common misconceptions that tax payer have is about filing joint tax returns after a marriage.
What most people believe is that its is mandatory for a married couple to file their taxes jointly; however, did you know that filing taxes separately under "married filing separately", is actually possible? It is true though that filing separately will cost you more than filing your taxes with your spouse.
However, in some cases this may actually help you save on your tax dues.
For instance if both you and your spouse are earning it is best to file you returns both ways at least once to find out which way works better for you.
It is not unusual to see that one way will let you save more than the other..
Also, there is no hard core rule that says just because you filed jointly this year you will have to do the same thing next year, you can file separately again if you wish.
Many times changing methods may actually help you save more on your tax out goings.
The next ambiguity that people harbor is regarding sales tax.
Usually people who have been filing their taxes for more than three decades carry the misconception that they can deduct the sales tax on purchases because this law was applicable before 1986.
However, currently, this policy is only valid in some states (Wyoming, Texas, Washington, South Dakota, Florida and Nevada).
In these states people can deduct their sales tax from their federal or state tax however the deduction can only be done out of one tax and not both.
But in other states this law is not applicable.
It's best to check the status of the law each year before filing your taxes to avoid mistakes.
Another issue which poses a lot of problems for tax payers is the deduction of $125,000 for tax payers above the age of 55 on capital gains achieved through the sale of a house.
This law has now been changed and the age barrier has been removed.
The way this regulation stands today, an individual can deduct up to $250,000 per person from the gains made through the sale of a house.
This means that in case of married couples a deduction of $500,000 applies.
If you have any confusion about a certain tax law, it is best to get in touch with a tax attorney or an accountant to sort out the issue.
There are several Dallas tax attorneys and accountants who would be more than wiling to advise you on tax related issues.
However, au contraire to this popular belief, this is not the case.
The taxes and the filing procedure that will work best for you entirely depend on your specific circumstances, in other word, what is good for one many person may not necessarily work for another.
Because the IRS changes the tax codes and regulation almost each year, there are several laws that are applicable to a specific situation; unless you are a tax attorney or an accountant you cannot possibly keep abreast of all these changes.
To top this confusion, finding out that what you thought was true does not apply any more can be nothing short of painful and not to say that it can also have dire consequences if you followed a law that is not applicable anymore and you under paid your taxes.
On the other hand, you may be paying too much and may realize it too late to even get a refund, unfortunately, too many people follow outdated tax laws blindly; under the perception that they are doing the right thing and throw a lot of money into the IRS coffers.
If you don't want to run into IRS trouble because you are misinformed or are simply not aware of the latest changes to the tax laws; here is some information that may prove vital.
One of the most common misconceptions that tax payer have is about filing joint tax returns after a marriage.
What most people believe is that its is mandatory for a married couple to file their taxes jointly; however, did you know that filing taxes separately under "married filing separately", is actually possible? It is true though that filing separately will cost you more than filing your taxes with your spouse.
However, in some cases this may actually help you save on your tax dues.
For instance if both you and your spouse are earning it is best to file you returns both ways at least once to find out which way works better for you.
It is not unusual to see that one way will let you save more than the other..
Also, there is no hard core rule that says just because you filed jointly this year you will have to do the same thing next year, you can file separately again if you wish.
Many times changing methods may actually help you save more on your tax out goings.
The next ambiguity that people harbor is regarding sales tax.
Usually people who have been filing their taxes for more than three decades carry the misconception that they can deduct the sales tax on purchases because this law was applicable before 1986.
However, currently, this policy is only valid in some states (Wyoming, Texas, Washington, South Dakota, Florida and Nevada).
In these states people can deduct their sales tax from their federal or state tax however the deduction can only be done out of one tax and not both.
But in other states this law is not applicable.
It's best to check the status of the law each year before filing your taxes to avoid mistakes.
Another issue which poses a lot of problems for tax payers is the deduction of $125,000 for tax payers above the age of 55 on capital gains achieved through the sale of a house.
This law has now been changed and the age barrier has been removed.
The way this regulation stands today, an individual can deduct up to $250,000 per person from the gains made through the sale of a house.
This means that in case of married couples a deduction of $500,000 applies.
If you have any confusion about a certain tax law, it is best to get in touch with a tax attorney or an accountant to sort out the issue.
There are several Dallas tax attorneys and accountants who would be more than wiling to advise you on tax related issues.
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