To avoid being overtaxed, maximize deductions and credits by tracking business expenses, contributing to retirement accounts (401k/IRA), and using HSAs. Key strategies include adjusting W-4 withholding, making quarterly estimated payments for self-employment income, and consulting a tax professional to optimize your business structure.

What is the $600 rule in the IRS?

The IRS $600 rule refers to the previous reporting threshold for Form 1099-K, but recent legislation (the OBBBA in 2025) reverted the requirement for payment apps (like Venmo, PayPal) and online marketplaces to report income to over $20,000 AND 200+ transactions, effectively canceling the phased-in $600 rule, although some changes might still happen for 2024/2025 as the IRS figures it out. This means casual sellers and gig workers are generally not getting 1099-Ks for small amounts anymore, but remember, you still must report all taxable income, even without a form, according to IRS.gov.
 

How to avoid getting taxed so much?

In this article

1. Plan throughout the year for taxes.
2. Contribute to your retirement accounts.
3. Contribute to your HSA.
4. If you're older than 70.5 years, consider a QCD.
5. If you're itemizing, maximize deductions.
6. Look for opportunities to leverage available tax credits.
7. Consider tax-loss harvesting.
8. Consider tax-gains harvesting.

What is the IRS 7 year rule?

The IRS 7-year rule generally applies to keeping records for claiming deductions or refunds for bad debts or worthless securities, giving taxpayers an extended time (7 years from the return's due date) to claim these specific losses, compared to the usual 3 years for most other tax matters, allowing for documentation of investment losses or uncollectible loans. While the standard time to file a claim for credit or refund is typically 3 years, the 7-year period is crucial for specific financial setbacks, ensuring you have documentation for potential recovery.

Does IRS forgive after 10 years?

The IRS generally has 10 years to collect tax debt from the assessment date (the Collection Statute Expiration Date or CSED), but this clock can be paused or extended by events like bankruptcy, installment agreements, Offers in Compromise, or being outside the U.S. for extended periods, meaning the debt doesn't always disappear automatically after a decade, especially in cases involving fraud.

How to AVOID Taxes... Legally (Do This Now)

What are the red flags for IRS audits?

Not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.

How do the richest people avoid taxes?

Business titans tend to take their compensation as shares in publicly traded companies and privately held businesses, as well as investments in “pass-through” companies with special tax rules.

What is the most overlooked tax break?

The most overlooked tax breaks often involve out-of-pocket charitable expenses, like mileage or supplies for fundraisers, student loan interest deductions, energy credits for home improvements, and IRA contributions for non-working spouses, alongside specific deductions for things like jury duty pay turned over to an employer, or unclaimed state tax refunds if you itemized sales tax instead of income tax. These often fall under the radar because they require tracking small expenses or understanding specific eligibility rules beyond just major contributions or standard deductions.

What is the $1000 instant tax deduction?

The "$1000 instant tax deduction" refers to a proposed Australian tax policy, specifically from the Albanese Labor government in 2025, allowing eligible workers to claim a flat $1,000 deduction for work-related expenses without needing receipts, simplifying tax returns for those with lower expenses but potentially costing those with higher expenses, starting from 1 July 2026. It's an option to replace itemised work-related deductions, not an extra refund, and doesn't affect non-work-related deductions like charity. 

What is considered a good monthly income?

A "good" monthly income varies by location and lifestyle, but generally ranges from $4,000-$6,000 for basic needs, $6,000-$8,000 for comfort, and $8,000+ for affluent living, covering essentials like housing, food, healthcare, and savings, with higher figures needed in expensive cities. Use the 50/20/30 budget rule (50% needs, 20% savings/debt, 30% wants) to see what fits your personal goals, or check the MIT Living Wage Calculator for your area's specific needs.

How do you avoid the 22% tax bracket?

To avoid the 22% tax bracket (or any higher bracket), you need to lower your taxable income using strategies like maximizing pre-tax retirement/HSA contributions, strategically harvesting capital losses, deferring income, and making charitable donations, which reduce the amount of income subject to higher rates, rather than changing the entire bracket system for all your income.

What is the IRS $10,000 rule?

The IRS $10,000 rule generally refers to Form 8300, requiring businesses to report cash payments over $10,000 received in a trade or business, to combat money laundering and tax evasion. This applies to single or related transactions within a year, including cash, cashier's checks, money orders, and other cash equivalents, and involves collecting payer info. Banks also report large cash transactions (over $10k) via FinCEN Form 112 (CTR). 

Is Venmo reported to the IRS?

IRS Form 1099-K is a tax document that reports any payments you received through third-party networks like Venmo, PayPal, or Apple Pay. If you receive more than $20,000 in at least 200 transactions through these platforms, you'll likely get a 1099-K.

What not to forget when filing taxes?

Wages, dividends, bank interest, and other income received and that was reported on an information return should be entered carefully. This includes any information needed to calculated credits and deductions.

Who evaded the most taxes?

Walter Anderson, an entrepreneur and billionaire, was convicted of the largest tax evasion case in American history. At the time of his conviction, he owed the United States government nearly a quarter of a billion dollars in back taxes. Perhaps the most notorious tax evasion scandal of all is that of Al Capone.

What are good tax write-offs?

20 Common Tax Deductions: Examples for Your Next Tax Return

• State income or sales tax deduction. ...
• Property tax deduction. ...
• Student loan interest deduction. ...
• Home mortgage interest deduction. ...
• IRA deduction. ...
• Self-employed SEP, SIMPLE, and qualified plans deduction.
• Medical and dental expense deduction.

What are common tax loopholes?

Backdoor IRAs, carried interest, and life insurance are just some of the loopholes you can use to reduce your tax bills. It's important to plan correctly and use the right loopholes, credits, and deductions for your unique situation.

How does Jeff Bezos avoid taxes?

In some years, billionaires such as Jeff Bezos, Elon Musk and George Soros paid no federal income taxes at all. Billionaires avoid these taxes by taking out special ultra-low-interest loans available only to them and using their assets as collateral.

What looks suspicious to the IRS?

If the deductions, losses, or credits on your return are disproportionately large compared with your income, the IRS may want to take a second look at your return. Taking a big loss from the sale of rental property or other investments can also spike the IRS's curiosity.

How to tell if the IRS is auditing you?

Remember, you will be contacted initially by mail. The IRS will provide all contact information and instructions in the letter you receive. If we conduct your audit by mail, our letter will request additional information about certain items shown on the tax return such as income, expenses, and itemized deductions.

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