Millions of Americans prepare their own income tax returns and are always on the lookout for clever ways to reduce their tax liabilities and increase their refunds. Your tax refund can be especially important when you are struggling financially or preparing to file bankruptcy. Here is the best legal advice to keep in mind when preparing your income tax return: DON’T CHEAT!
First off, tax fraud is a federal crime. Is the little money you save really worth a U.S. Attorney on your back? Additionally, there are financial penalties for tax cheats (20% for negligence, but 75% for tax fraud cases). Finally, while bankruptcy can reduce or even discharge some tax debts, you are stuck with a fraudulent tax debt forever. The benefit is just not worth the risk.
While claiming a blind spouse when you are single is not advised, there are some legitimate tax deductions that may save you money:
You can’t deduct the cost of your home telephone line, even you use that phone for your business. However, you can deduct the cost of a second phone or cell phone that is used exclusively for your business. You can also deduct the long distance charge for a business call.
You cannot deduct attorney fees if your legal dispute is “personal” in nature. This includes family law cases, personal injury, and even bankruptcy. However, attorney fees for your business are deductible. You can also claim a deduction for personal legal fees related to contesting, paying, or claiming a refund on your taxes.
Goods and cash donated to a charity are common deductions, but the IRS will not allow you to claim the cost of your time or services to the charity. However, you can deduct the actual costs you paid when performing charity work.
You cannot deduct commuting costs to work, period. However, work-related travel expenses are deductible, including the costs to visit customers or vendors, attending a business meeting away from where you work, and traveling back and forth during the workday.
Health Club Fees
You cannot deduct health club fees if the activity is merely beneficial to your health. However, if your doctor specifically prescribes a gym or health club membership for a diagnosed medical condition, the expense qualifies as a medical deduction.
Using the federal tax code for your advantage is always a good idea, and having a tax professional prepare your return often pays for itself. The tax code is full of opportunities to reduce your tax burden. Just remember to not increase your burden by trying to scam the federal government.