Taxes: 5 Things You Need to Know

Know About Taxes
Image Source: Envato

You may be wondering what there is to know about taxes. Some people may feel that they should have no knowledge at all of the topics, but the reality is that knowing how taxes work can be important if you want to be successful. Here are a few things to know about taxes that will be helpful to you.

Income Tax

First of all, there is an income tax. An income tax is a tax imposed by a federal government on a person who earns income. Individuals, corporations, estates, trusts, and other entities may owe this tax.

Failure to pay or evasion of and/or resistance to tax, which is generally illegal, is punished by law. If you earn money from investments or rental real estate, you may owe income tax to your accountant.

Local Income Tax

In most states, there is no federal income tax because there is no central authority to collect it. This means that each state has its own rules for making their own income tax collection policies. There are also some exceptions, so it is important to make sure you understand your local laws.

Personal Property Tax

This type is usually based on the value of the real estate you use. A house is worth more than land used for farms and gardens, for example, so the tax on land is much higher than it is on the house. In many cases, the personal property tax is used to finance roads and bridges, so understanding the rules regarding the payment of personal property tax can help you in determining what to do with your property.

Paying Your Taxes

When it comes to paying taxes, there are a variety of ways you can get the money you owe. Your local government may offer a variety of payment options, such as tax refunds and tax deferments. These are both good options, but you may find that there are other options available.

Some types of taxes are paid automatically, while others must be requested. These include sales taxes on purchases and on income and property taxes. If you have a credit card or loan account with a bank, they will generally automatically deduct the amount of state tax and local income tax when you make your payments. But if you do not have one, you can ask the bank for a refund.

Audit Representation

There are many different reasons why your business tax documents could present a red flag to your IRS auditors. The first thing you should know is that a tax audit is not a death sentence. It could simply be the result of some simple misspelling in your tax forms, and oversight on tax code or some other explanations required.

It is important to keep your taxes organized and up to date so that if something does happen with your tax forms, you will not have lost everything. Your tax representative can provide advice about what to do to improve your odds of avoiding an audit and what steps are required to fix it. In the end, it is up to you to determine the best course of action for you. If you owe more money than you can afford to pay, you may need to file for bankruptcy protection.

While it is good to consult with your financial professional when you feel you might have a problem with your tax debt, it is also wise to have an expert represent your case to the IRS. Tax attorneys specialize in representing their clients before the IRS and their lawyers have experience dealing with these types of cases.

Some tax attorneys even have experience dealing with audits. In general, an attorney will work in tandem with the CPA to come up with a strategy to help the client avoid an IRS audit representation. A tax attorney can help you decide if the audit is warranted and what steps need to be taken to resolve the problem. Many attorneys also have experience working with your IRS representative and your other tax professionals. As an added bonus, they are very familiar with the complex tax law rules that apply to your specific situation.

If you feel that you are having issues with your tax debt, you might want to hire an attorney. The tax attorney will take care of your legal issues and handle the audit of your documents to ensure your tax status is up to date. An attorney can also help you to create an action plan to address your problems with the IRS. He or she can give you honest advice as to how you can reduce your tax debt and prepare for the audit.