The federal government allows income shifting to take place because they assume that it isn’t done solely to reduce, or avoid, taxes. Rather, they assume that the main purpose for shifting the income is to produce a pool of savings that will be used for some specific purpose at a later point in time, such as higher education. They also allow it because the person shifting the income isn’t allowed to move just the income; they need to move the income- producing investment. This means that you just can’t give the inter- est away from your corporate bonds and keep the bonds under this strategy. You have to give away the corporate bonds (income-pro- ducing investment in this case), as well. This isn’t to say that you can’t just give away money. If you were to give away the $3500, it would be considered a gift and would fall under the IRS’s codes of gifting. The interest from the corporate bonds would still be con- sidered part of your gross income. In order to get that income off of your tax forms, you would need to give the bonds away, too.
OTHER WAYS TO SAVE ON TAXES
When you see a mistake, are you likely to correct it, or do you just glance over it? If we’re talking about your taxes, hopefully you would correct it. Chances are that the mistake you are catching would have cost you money. There are a number of simple mistakes that people make on their taxes that, if corrected, could help them save money on taxes. Some of these mistakes are just silly errors that are easily eliminated.
Withholding Too Much Most people I know get refunds at the end of the tax year. However, many of these people are receiving too much. I’m not saying that the government is paying them more than they are entitled to, I’m saying that these people have been withholding too much money from their paychecks. Tax refunds are good, but the smaller they are the better. Why is that? Because the more money you pay into the government during the year from your paycheck, the less money you have to help achieve your goals.