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Welcome to Tax tutorial page as we take you through some basic tax laws and how to go about it.
Tax, as the principal source of revenue to government of any nation, and that it also serves as a tool for economic stabilization and redistribution of income among economic agents, is defined as a compulsory levy imposed by government on individuals and organizations within a country primarily for the purpose of raising revenue to execute its expenditure program mes.
Tax can be distinguished from other forms of levies with the following:
*Tax is compulsory contribution which failure to pay may make charge-able person liable to punishment as prescribed under the relevant provision of the tax law.
*Tax does not have element of quid pro quo as such it does not confer specific benefits to the payers unlike other levies as fees, charges etc.
*The revenue from tax is used for the good of everyone in the country.
Apart from some less severe taxes such as sales tax and license fees that considered unavoidable, It is quiet legal possible to do your business for a whole year with little or no tax to FIRS( that is your federal income tax, and probably, state income tax). As we proceed you will understand what I mean by that.
Apart from some severe taxes like sales tax, and license fees that are seriously unavoidable, it is quiet possible for your business to prosper for months without paying the outrageous tax levy from federal income tax, and sometimes, double taxation of state income tax authorities.
Take for example, if you publish a newsletter, the possibility to spend your entire advertising budget for next year in December of this year is there. What I mean is that all the advertising and promotion expenses is deductible this year. How ever, the additional income that results from those advertising money does not shows up until next year.
On the other hand, what if you are not in business? Any possibility of income reduction or wipe it out completely? Now, how about when you turn your hubby into a business, to enable you deduct the expenses. The IRS will only agree with that if you are able earn a profit in three out of five years.
If you scale through the task, then the IRS will agree with you that your hubby is a legitimate business . That is why you need the services of professional to help you.
Another area that calls for concern is that if you have to earn those profits, you may end up with more tax to pay. See it this way again, suppose you don’t pass that three out of five years test, you may not be necessarily shut down, but the IRS says that if the facts available and circumstances indicates that you entered the activity with the objective of making a profit, (even if you lost instead) it may still be a business.
Here comes the situation where you need a professional. How then do set up the facts and circumstances, such that the IRS will allow you deduct your hubby/business expenses. You can contact us for professional .
Our major concern on this taxation tutorial page is to tell you some legal ways to avoid double taxation. What you read here, unlike a conventional tax planning books compiled by an erudite tax attorney or CPA. This is simply a discussion that will lead you to a professional in your area to help you draw up your tax returns computation.