Tax Law Basics

Most American citizens have to send their income tax returns to the Internal Revenue Service (IRS) each year. Nevertheless, tax law is complicated -- much more complicated than the average American can comprehend. Tax attorneys spend years studying local, state and federal tax codes and it often takes them years of practice before they gain an in depth understanding of the law.

Among the many complicated topics, individuals who are preparing their taxes need to know about claiming exemptions and they need to know about claiming deductions if they want to avoid being audited. Further, they need to know how to deal with an audit in the event one is triggered.

About Personal Income Taxes

Personal income taxes must be filed and paid each year to the IRS. That said, some very important legal issues come up with with regard to taxable versus non-taxable "income." In basic terms, the IRS classifies the following as income:

  • Earnings
  • Commissions
  • Tips
  • Dividends
  • Capital gains
  • Unemployment benefits
  • Alimony
  • Social Security benefits
  • IRA distributions

Interestingly, income is not always taxed at the same rate. At this time, the United States of America employs a progressive income tax system. What that means is that the lowest levels of income are taxed at a certain rate, whereas higher levels of income are taxed at a higher rate. For instance, if an individual earns $60,000 per year, he or she might be taxed 10 percent on the first $20,000 earned. The next $20,000 might be taxed 20 percent, and so forth.

Tax deductions and tax credits can be used to decrease an individual's tax burden. A deduction is any expense that can be subtracted from an individual's taxable income. Some of the most typical deductions include:

  • Medical and dental bills
  • Property taxes
  • Student loan interest
  • College tuition
  • Mortgage interest

Tax credits are similar to deductions and they can be used as a way to reduce an individual's taxable income. Some of the most typical tax credits apply to individuals who are taking care of dependents and individuals who are first-time homebuyers.

How Can a Tax Attorney Help?

A lot of Americans are confused and overwhelmed by tax laws. This is where a tax attorney can help. A tax lawyer can look for important deductions, credits and exemptions for which you may qualify, in order to reduct your total tax bill. A lawyer can also give you advice so that your tax filing is perfectly in accordance with the law so you do not inadvertently commit an illegal tax error that could -- in some cases -- result in an IRS audit.

A tax attorney can also be of assistance to individuals who make tax errors and to individuals who file their taxes late or do not file them at all. Those who are targeted by an IRS audit can also benefit from consulting with a lawyer who can advise them of their rights and options and their best next steps.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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