Dealing with money matters seems to be one of the most complicated tasks of every individual. I do not have any problems when it comes to managing my personal taxes since I do not earn that big, but I often find it difficult to understand the various laws of taxation. Good thing I have a program in my computer that is able to help me with managing my taxes. This tax program has helped me avoid penalties or late charges. It is not easy to miss scheduled tax payments because it entails a bigger burden.
My father had managed a company for about a decade and decided to retire because he felt he already needs to relax after many years of hard work. He divided a percentage of his company share equally among us, his children. Each of us was given checks, and these checks were issued by the company. Since they were issued directly from the office of my father’s company, they are automatically subject to capital gains tax. We were then given a statement that we can use to process out tax.
I kept the statement in safe place, but my sister and his husband couldn’t remember where they placed theirs. They asked for the advice of a tax preparer. They were told that they don’t need to pay tax for the gift they received from our father. They were then relieved from what the preparer had said. But after a couple of months, they received a letter from the internal revenue. The letter stated that they have not reported and paid their capital gains tax, and they were really shocked. They again approached the tax preparer and told them about the matter. The accountant told them that he was not informed well of where the income came from and that they did not present any documents, and therefore, she is not responsible for the penalty. She explained that if an income comes from an investment, it is expected that a capital gains tax must be paid.
I’ve learned a lot from the experience of my sister. Many people choose to give gifts in the form of money, cars or house and lots. We should all know what gifts are taxable and those that are non-taxable. Gifts in the form of cash are non-taxable provided that it is below a certain amount. On the other hand, they are taxable if it came from an investment, and a capital gains tax must be paid. My siblings and I should not have paid any taxes if only my father had withdrawn his share from the company before dividing it among us. Or, he should’ve given us only one check so that we don’t have to file one by one and that it would be much easier to pay the tax involved.