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The thought of spending time reading about income taxes probably rates right up there with having a root canal without painkillers. That's one reason why about half of American taxpayers pay an accountant or other professional adviser to handle their taxes.
Fortunately, tax preparation software can take much of the pain out of the process. Online or off-the-shelf programs can do all the math calculations for you, make sure that the amounts you type in are transferred to the correct forms, and even alert you to deductions you might not have known about.
So why should you spend your time reading about income taxes? Even if you use software or delegate the preparation of tax returns to your accountant or professional preparer, the ultimate responsibility for a missed payment or filing deadline, an improperly claimed deduction, some overlooked income, or incomplete records is yours alone.
Whether or not you plan to do your own taxes, you need to create (or at least oversee the creation of) the basic business records that will be used to complete the forms. You must know what kind of documentation to save throughout the year, not only to prepare your return, but also to substantiate your responses to the questions on the forms in case you're audited. You can safely assume that a tax auditor won't look kindly on you if your only defense is "I didn't know I had to do that." The old legal saying that "ignorance of the law is no excuse" is perhaps most often applied in tax settings.
While the current U.S. tax code is almost unbelievably complicated - the law, regulations, and explanations run to over 48,000 pages in one of the best-selling tax publications for professionals - it provides numerous opportunities for tax savings, if you know where to look, if you know where to look and how to apply the rules.
Our goal in this material is to lay out the rules for you as clearly as possible. We know that your immediate concern is to get your taxes filed correctly and on time, so that you get any refund that's due and so you don't get socked with penalties and interest if you're selected for an audit.
We also want to tell you about the many ways you can save taxes by structuring your affairs to take the greatest possible advantage of the existing laws and regulations. While our main focus is on tax issues that impact you and your family, we'll also discuss tax rules for small businesses operated as sole proprietorships.
Tax laws change constantly - in fact, recent years have seen a major overhaul of the IRS's structure; significant changes in taxpayer's rights; and changes in business tax credits and deductions, depreciation and expensing elections, capital gains, Roth IRAs, the home office deduction, the child tax credit, education tax breaks, the $500,000 exclusion for gain on sale of a home, to name just a few. It's important to keep up-to-date with all these changes in order to keep your tax bill to the minimum.
For starters, we've tackled these topics: