Every tax season is a nail-biting period for many taxpayers, especially those whose grasp of this annual ritual is insufficient. The anxiety often arises from fear of making errors, which attracts punitive responses from the IRS. But what if we told you that you could avoid the emotional roller-coaster with a few hidden tricks? Read on for a comprehensive guide toward an anxiety-free tax season.
1. It is possible to enjoy a favorable relationship with the taxman
Mention the IRS, and one is likely to start panicking. Of course, the behavior could result from an abusive relationship, so to speak, between some taxpayers and the government’s collections agents. But take a good look at our society, and you’ll see people who enjoy restful nights because of non-interference by tax agencies. So, what is the trick? The secret lies in creating leverage in your own life, which we view as the golden staircase to financial freedom.
2. Focus on tax optimization
Tax optimization is the most critical step towards creating leverage in your own life. Those who implemented strategies to reduce their tax liability make up the most significant chunk of the financially free. We know that people have diverse opinions about taxation, but we also know that the less of your income goes to the government, the more you inch closer to tax optimization. If you can beef up your cash flow, you can be confident that your profitability will expand, and your living situation will improve.
3. You can minimize your tax liabilities, and it is less complicated than you think
When you buy an expensive car, one expects to engage a mechanic to check the engine when it begins to misbehave. Similarly, no one expects you to memorize the entire tax code to create winning tax strategies. The point is, you should start optimizing your taxes, especially if you believe you’re giving away to the government more than is fair. It is critical to note that tax optimization does not happen during the yearly reporting. Instead, it takes deliberate actions when earning the taxable income.
4. Know the difference between your certified public accountant (CPA) and your tax attorney
Sometimes you need an expert to explain specific aspects of the tax code or help prepare financial statements for tax reporting. Usually, this is a CPA’s forte. CPAs are individuals with specialized training in preparing financial statements and filing tax returns. Their knowledge on the technical side of taxation is often in-depth. However, sometimes you need a shrewd negotiator to argue your case with the IRS, and a technical-oriented expert is not the ideal pick.
This is where tax attorneys come in. Tax attorneys receive intense drilling on advocacy, specifically to defend people like you against government agencies. Our knowledge of the tax code ensures that we build a defense that respects your tax positions and the dictates of the tax code.
5. Government agencies will get more aggressive with taxpayers in the aftermath of Covid-19
The past few years have been challenging, more so to the folks in government. Steering a nation of over 350 million people through a crisis is never easy. The crisis destroyed livelihoods and set the income of many individuals and businesses back. Therefore, the government would hit a massive wall of protests if it attempted to raise taxes. But the government was also impacted, and it desperately needs to raise revenue. And what options does the government have? It will either raise taxes, which we’ve already seen politically untenable or come harder on tax offenders. In this light, there will likely be increased focus on audits and aggressive collection actions in the coming days and months.
6. The government will likely target businesses disproportionately
A wild animal will kick and make noise when cornered. Similarly, the government is now in a tight spot, and we are confident the fight instinct will kick in soon. What is likely to happen when this time comes? The IRS is likely to target businesses because their cash flow is more considerable than individuals’. If enforcement agents increase daily engagements, businesses are the natural first target.
7. Enforcement agents often fight dirty
Still on the analogy of a trapped wild animal, the government’s fight instinct often leaves many individuals and businesses less pleased. We say this with all due respect to the government agents who wake up early and retire late to ensure the government is functioning as it should. However, as advocates for financial freedom and peace of mind for individuals and businesses, we must also make it our business to protect whoever might fall victim to a few rogue agents.
Some of our clients have frequently suffered the fate of encountering the bad-faith agents, and we’ve always been more than ready to help. But unfortunately, as long as tax enforcement agents lack the incentive to fight fair, taxpayers will always be at the mercy of a few “bad apples”.
8. Have an in-depth understanding of the workings of the tax enforcement system
Your cash flow will always be at risk if the government needs money to fund its ever-growing budget. Perhaps your tax situation has always been smooth, and you could be thinking that you’ll never suffer unnecessary tax liability because you’re playing by the rules. Unfortunately, this does not make the tax enforcement system fair to everyone else. In fact, the reality is that many individuals and businesses find themselves with thousands of dollars in tax debt every year, some of them because of mistakes and others because of inadequate information. This is the nature of the system.
9. Never underestimate the government’s willingness to collect a tax debt
You have always honored your tax obligations, and you are sure your contributions have helped the government implement programs that benefit many people. However, this should not deceive you into thinking you’re the government’s friend. When collections agents descend upon your financial records, they often want to find that one smelling rat that will justify their actions later. In this adversarial situation, you’re better off well prepared. It means understanding your rights and if things go south, your risks.