No one enjoys paying income taxes, and while we can't advocate that you follow illegal means to hide your income, we can offer legal ways to help you protect your money and let you keep more of it for yourself. The sad fact is that most Americans fill out the short form when filing their taxes and don't take the time to find out how they can pay less to the government.
Fund your retirement plan. The nice thing about contributing to a Roth IRA or a regular IRA is that you can contribute until the deadline for filing your taxes. That means that you have until April 15 to contribute to your IRA and take the deduction against your previous year's tax burden. An IRA is tax-deferred, meaning that you can postpone paying taxes on the amount until you withdraw it.
Roll Capital Gains from a real estate transaction into a 1031 Exchange and defer paying taxes on the profit. Normally, you must pay Capital Gains tax on the profit from the sale of any real property. However, if you plan ahead, you can sell the property, roll the profit into another property and pay no taxes. Learn more about rolling your profit into a 1031 Exchange (see Resources below).
Hire a tax attorney if you operate a small business. Unless you are an accountant, you are probably missing deductions that could save you more money than a tax account will charge to file your taxes. Tax accountants stay abreast of each year's new tax laws, they figure not only your initial expenditures but also depreciation of equipment and they can roll portions of a profit or loss to the next year in order to save you money.
Claim your teens as deductions, even if they are claiming themselves. Individual filers often miss this deduction because they think they cannot claim their teens if they have a job and claim themselves. On the teens' tax forms, there are boxes to check if they are eligible to be claimed under their parents' taxes. Make sure they check it.
Sell your residence every 2 years. Although this may not work if you want to stay in the same neighborhood for an extended time, you can benefit greatly under the tax laws by selling your own home and keeping the profit tax-free. You may only do this once every 2 years and you may only claim a profit of up to $250,000 per individual or $500,000 per couple. At any rate, it's a huge tax savings.
Call the IRS. Don't worry, they're nicer on the phone than you may think. Ask for their advice when you have specific filing questions. There is no charge for their advice and you can reach them, toll free, at (800) 829-1040.
Never hide your income. It's not worth the risk. If you face an audit and you've taken some deductions in "gray areas," the auditor will disallow them at that point. However, if the auditor discovers that you did not claim a portion of your income, you could go to jail.