Grace Forms Blog

Back Tax Guide and Ebook; Your Back Tax 101

Today, we want to give you some insight into some misconceptions you may not find in every back tax guide.  These are tips that many may find obvious, but sometimes the fundamentals trip up even the most seasoned taxpayer.  Since this is graduation season, it seems appropriate that we cover these tips now so that those heading into the job market can get used to wrapping their heads around some of these esoteric guidelines before crunch time arrives next year.  And, not to be Negative Nancys, but hopefully you will find a job with a taxable income by this time next year.

One important key to remember is that “tax credits” and “tax deductions” are not the same thing.  Would you rather have an amount deducted from a dollar, or would you rather have a credit for a dollar?  This is an easy thing to forget, but a back tax guide is doing a disservice to those who do not make note of this important distinction.  Deductions are based upon your income bracket, and thus when multiplying the percentage of your tax bracket to the value of your deduction, you get the worth of the deduction.  And you wondered why people hate doing their taxes so much…

Speaking of things people hate about their taxes, there are ways in which you can avoid getting audited.  Frankly, the best way of avoiding an audit is to be honest on your taxes.  Honesty should always be the first step in a back tax guide, but we realize that is not usually the case.  When the IRS notices consistent trends in your income history, number of dependents, etc, then there is little cause for concern from their standpoint, as everything looks as it should.  When you start suddenly earning a fourth of your income and add 12 new dependents, that’s when Uncle Sam starts to get a little worried you might not be playing by the rules.

Dependents, since we are on the subject, are a temptation for some.  Although we know you’d never do this (right…?), some people go so far as to list pets as dependents, and although your pets may be dependent upon you for survival, the IRS does not consider them dependents.  This might seem a little obvious, but what good is a back tax guide if it only tells you the obvious.  What might not be so obvious, though, is that your girlfriend or boyfriend who crashes at your place half the time cannot be claimed as a dependent if her/his parents are doing so as well.  Be aware that this also pertains to children as well.

These may not be news for some, but they are the kind of questions that many people are afraid to ask because they are so basic.  Needless to say, our back tax guide is a lot more comprehensive and deep than this, but we can’t offer golden advice for free.  That said, though, our guide is affordable, and can also save you tons of money in IRS fees.  It’s a win-win.

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