The phrase “The only thing that’s certain is death and taxes” is very true. And with taxes on the rise many people are attempting to find ways to avoid coughing up cash to the federal government, the wealthy included. According to The New York Times, new legislation for 2013 has raised the marginal income tax rate from 39.6 percent from 35 percent for individuals with income over $400,000 and for couples with income over $450,000 and deductions can start to phase out on income of around $250,000.
Some rich people are on board with the tax increases like Warren Buffett and Russell Simmons, but others are struggling to pay their rapidly growing tax debt.
Other wealthy people are having issues paying their tax bill. We recently talked about how the Queen of R&B, Ms. Mary J, was hit with a $900,000 tax lien and now another entertainer has joined the list. This week Perez Hilton reported that rapper Snoop Dogg is not on good terms with the IRS owing $546,000 in back taxes from 2009 and 2011. This isn’t the first time the “Gin and Juice” rapper has been in trouble with the IRS. He had this same issue back in 2008.
The list of celebrities that have experienced tax problems in the past include Wesley Snipes, Nicholas Cage, Toni Braxton, Lindsey Lohan and the goes on and on. However, you don’t have to be rich to get into tax trouble. StatisticsBrain.com reports on a study conducted by Pew Research, showing that 44 percent of audited individuals make under $25,000 per year. So although the rich folks are what we read about in the papers, there are millions of ordinary people who get audited that don’t make the front page.
Filing your taxes late, substantial understatements, disregarding tax rules and regulations, and bounced checks are just some things that could get you into trouble with the tax man. In most cases if you are found to have dabbled in tax evasion you may just get hit with a fine. However in other cases you could face criminal imprisonment for up to five years.
Now when it comes to taxes it’s important to make sure you reduce your tax burden as much as possible through legal practices spelled out by the IRS. This is called “tax avoidance” and is encouraged by the federal government. This includes, for example, finding all of your deductions and getting any credits you qualify for.
However you don’t want to reduce your tax burden by lying or being deceitful, which is tax evasion. The biggest difference between tax avoidance and tax evasion: one is illegal.
With the tax deadline approaching it’s important to keep your morals at the forefront. If you don’t feel qualified to do your own taxes then hire a professional. At least in that case, if you have been truthful with providing information and things hit the fan, you have a preparer to help clean it up. Income taxes aren’t going anywhere. It just makes since to be truthful and pay your tax bill instead of wondering if the tax man will come knocking at your door.