Few people want to pay high tax bills as they likely have other debts and expenses to cover. Evading taxes would be a terrible idea since the action could result in criminal and civil penalties. Pennsylvania may find there are more acceptable options found under legal tax avoidance statutes.
The tax avoidance option
On the surface, the term tax avoidance sounds like something the taxpayer is not supposed to do. Although the wording may not be perfect, the term merely refers to using allowable deductions and credits to reduce tax obligations. For example, a self-employed person may take full advantage of a health insurance premium deduction or the cost related to the business use of a car.
There are several different examples of tax credits, including the child tax credit and the earned income tax credit. Deductions come in many forms, and an example is charitable giving.
Taking advantage of credits and deductions
Not everyone may know about all the tax credits and deductions they could take. Meeting with a tax professional could result in the taxpayer learning about the credits and deductions, potentially resulting in a much lower tax obligation.
Tax issues could arise even when taking legal credits and deductions. Namely, the taxpayer may face an audit. Dealing with the audit often involves providing supporting information that addresses the IRS’s concerns. Perhaps the IRS wants to see receipts for claimed deductions.
Even if the IRS does not respond favorably to the taxpayer’s initial response, the process could continue. Filing an appeal or going to Tax Court reflect two possible options.
Amending past tax returns may afford taxpayers a chance to take advantage of credits and tax deductions they previously missed. However, claiming tax refunds is subject to a statute of limitations.