Looking for Tax Shelter
Dear Gil,
Being in the music industry I pay a lot of taxes. I also see a lot of entertainer's falter in the paying of theirs and fall into tax trouble.
What would you recommend for someone who receives a lot of royalties and pay
a lot to the IRS.
Are there shelters or investments that those who are in my predicament can
utilize?
KB
Signed,
KB
Dear KB,
I wouldn't exactly call your situation a predicament. Everyone is
responsible to pay taxes. Some of us have it withheld from our pay
before we can spend anything. Others are required to do it on their
own if they receive significant passive income (rents, royalties,
dividends, interest, etc.) or self-employment income over a certain
amount. The important thing for people, such as yourself, to do is
make sure they pay estimated taxes. That is, on a quarterly basis,
make note of what you've received in income and deduct any expenses
incurred related to the generation of that income. Once you've
figured out that amount, you'll have to find out what your tax rate is
(varies on the amount) and remit that payment by the due date. That
will ensure that you are paying the right amount of tax and in a
timely fashion. If the government notices that you owe a significant
amount of tax every year, when you file, they can penalize you for
underpayment of taxes, as they require persons receving income you to
pay as you go.
As far as shelters or investments, there are a vast number of
strategies to employ in either minimizing or deferring income tax.
However, a true tax professional will look at each client's particular
set of circumstances in providing them with a solution to help them
minimize their tax liability. Just be careful of tax schemes that
have the potential to get you in legal trouble. Tax authorities
usually hold the taxpayer responsible, even if they acted on the
advice of a consultant.
Being in the music industry I pay a lot of taxes. I also see a lot of entertainer's falter in the paying of theirs and fall into tax trouble.
What would you recommend for someone who receives a lot of royalties and pay
a lot to the IRS.
Are there shelters or investments that those who are in my predicament can
utilize?
KB
Signed,
KB
Dear KB,
I wouldn't exactly call your situation a predicament. Everyone is
responsible to pay taxes. Some of us have it withheld from our pay
before we can spend anything. Others are required to do it on their
own if they receive significant passive income (rents, royalties,
dividends, interest, etc.) or self-employment income over a certain
amount. The important thing for people, such as yourself, to do is
make sure they pay estimated taxes. That is, on a quarterly basis,
make note of what you've received in income and deduct any expenses
incurred related to the generation of that income. Once you've
figured out that amount, you'll have to find out what your tax rate is
(varies on the amount) and remit that payment by the due date. That
will ensure that you are paying the right amount of tax and in a
timely fashion. If the government notices that you owe a significant
amount of tax every year, when you file, they can penalize you for
underpayment of taxes, as they require persons receving income you to
pay as you go.
As far as shelters or investments, there are a vast number of
strategies to employ in either minimizing or deferring income tax.
However, a true tax professional will look at each client's particular
set of circumstances in providing them with a solution to help them
minimize their tax liability. Just be careful of tax schemes that
have the potential to get you in legal trouble. Tax authorities
usually hold the taxpayer responsible, even if they acted on the
advice of a consultant.