Say the word ''taxes'' and most people groan. There are good reasons for this response: First of all, the cost of paying your taxes annually can be a financial burden. You may feel taken to the cleaners every time you view your paycheck after withholding for federal income taxes (not to mention state income taxes as well as Social Security and Medicare taxes).
Second, the tax law is very complicated and changing all the time. As of February 1, 2010, the Internal Revenue Code (“Tax Code”) had 3.8 million words. There were only 11,400 words in the Tax Code in 1914, 1 year after the constitutional amendment authorizing the levy of an income tax. There were major changes in the tax law in 45 of the past 48 years—and this year is no exception! In addition, new court decisions and IRS rulings appear each day, providing guidance on how to interpret the law.
Third, you have to know what the tax rules are and can't claim ignorance to avoid taxes and penalties. Even if you use a tax professional or tax preparation software to prepare your return, you remain responsible for your taxes. The Tax Court has noted that using software is not an automatic excuse to avoid underpayment penalties.
How can you combat ...