In the United States, the Internal Revenue Service (IRS) describes different methods of legal income tax avoidance within the text of the Internal Revenue Code. These methods are considered legal not only because of their foundation in the Internal Revenue Code but also due to a decision made by the Supreme Court of the United States in 1935 in the case of Gregory v. Helvering.
Ambiguities in tax law are often difficult for people with no experience in the legal or accounting fields to understand. As such, many people seek out the assistance of a tax attorney when hoping to uncover new means of income tax avoidance. The tax attorney can help to translate the wording of the tax law and advise on the client on the best method of filing taxes. By exposing these ambiguities to a tax authority, the taxpayer may receive a reduction in taxes for that tax year.
By applying for disability, a person may receive special tax treatment depending on the extent of the disability and its affect on the person's ability to work and provide for him or herself. When some applies for disability payments, the condition is investigated to determine if that person does qualify. As the person then has a reduced income, he or she may be eligible for specific forms of income tax avoidance.
Tax credits are provided by the Internal Revenue Service and other tax authorities for those taxpayers that qualify for the credit. The Internal Revenue Code outlines different tax credits that are available as a means of income tax avoidance. However, the person must ensure that he or she meets the minimum requirements to receive the credit. A tax credit is different from a tax deduction in that it is applied prior to filing taxes and its effect is immediate, thus reducing a person's income taxes prior to having to pay them.
Tax deductions are available to taxpayers as they file their income taxes. The Internal Revenue Code outlines various deductions that can be applied for in order to lower income taxes. This form of income tax avoidance is applied for while filing tax returns and its effect is felt through the amount of money that a person may receive in their tax return.
Prior to seeking out legal means of income tax avoidance, it is recommended that a person consult with a tax attorney and/or qualified accountant. In this manner, the taxpayer can be assured that he or she is taking the proper action and will not incur penalties and other ramifications as a result.