Tax Avoidance
What is tax avoidance?
The Act of legally lessening tax liability
What is Tax Fraud
The illegal ways to not pay or to underpay taxes
What is one way to Income shift?
Tax Inversion
Hiring Family Members
UGMA Accounts
This year you have an income of $100,000 but is expected to decline to $75,000. You are looking to sell your car valued at $20,000. When should you sell your car?
Wait until next year (lower tax bracket)
What is the difference between a Simple and Roth IRA
Simple: Contributions can be deducted
Roth: Earnings can be withdrawn tax free
What is the basic tax avoidance everyone gets
Standardized Deduction
What are monetary penalties for tax fraud
Up to $100,000 for individuals, $500,000 for corporations
What is Tax Inversion
Where a business merges with a foreign company and parks earnings offshore in country with lower tax rate
How can deprecation help lower tax liability
You can deduct them as an expense
how could muni bonds be beneficial to corporate bonds
muni Bonds is exempt from federal income tax and often state income tax
What is the type of tax reduction where taxes are reduced on dollar for dollar basis
Tax Credit
Why was Al Capone finally arrested
He committed Tax fraud
How does Hiring Family Members help with tax reduction?
Business owner can write it off as a business expense and deduct it
How can accelerating depreciation be beneficial
Allows you to claim significant deductions in the current year
If you expect to be in a higher tax bracket when you retire what type of IRA should you choose
Roth IRA
What is the type of tax reduction where tax benefit is at the marginal tax rate
Itemized/Standard Deduction
Give an example of Tax fraud/Evasion
Lying about Income
Destroying Tax records
Failing to file tax return
Claiming extra credits/deductions
What is a UGMA account
Investment account made for child
What is the difference between standardized and itemized deductions
Standardized deduction is a base deduction everyone has access to
Itemized deduction is a grouping of deductions that people can take based on their spending
Do those hips lie?
Only when it comes to taxes
Why are UGMA accounts good for tax advoidance
Allows first 1250 to be tax free and additional 1250 to be taxed at Childs rate