Your tax liabilities can be significantly reduced by virtue of appropriate tax planning. Moreover, it will also keep you safe from the prying eyes of Inland Revenue Service and will definitely save you tons of temporal and financial resources.
Smart tax planning can help you stay clear of being confronted with a mind-bogglingly massive federal or state tax bill. You will be able to determine your standing well before the 15th of April.
Cumbersome tax procedures
Taxes can be quite a complex process to deal with and that is exactly why a number of people keep delaying them till the very last minute. But this latency can prove to be fatal! Filling out state or federal tax forms in haste on the 14th of April can result in you missing out on some of the deductions that you cash on in or even worse, you can run the risk of being caught on the IRS radar.
It boils down to your personal choice whether you intend to plan alone or want to hire the services of a tax professional. Experts recommend to hire professionals to carry out this complex task as they have the requisite expertise and are cognizant of how to help save you money and time.
Ensure thorough tax review
The most important step is to closely analyze your last year’s tax minutely to figure out any loose ends. Ensure that you do not miss anything of significance. You can come across some probable unpleasant disclosures such as money lost, but it will go a long way in helping you become better prepared for the existing year’s tax. You can carry out this task either on your own or alongside a tax planning professional.
You need to reduce your taxable income through deductions in order to start saving money on your taxes. Here are a few questions that you need to answer with regard to deductible items:
- What is your annual contribution to your retirement fund?
- What is the extent of your charitable donations?
- Do you plan to renovate your house to accommodate a medical expenditure (for instance will you be getting installed a wheelchair ramp?)
- Do you own a health saving account (HSA)?
- Have you paid dues to a union or similar professional entity?
- Do you own an office or designated working place?
There are tons of different write offs that you may claim as deductions. So, we advise you to be acquainted with any of the following:
- Any major medical or dental expenditure incurred by you throughout the fiscal year
- Money spent on some volunteer work including gas, lunches, dinners, parking etc.
- If you sell a home for profit, you may deduct a segment of it
Ensure accurate maintenance of records
You should ensure that you maintain all your records and receipts in case of an audit. The IRS may conduct a retrospective audit as far back as six years. So, comprehensive and documented records will leave you in good stead in such a scenario. A significant aspect in tax planning is to ensure that all deductibles are legal which would give no opportunity to the IRS to suspect your returns for any wrongdoing.
You should also begin to calculate your tax well in time to save yourself from being shocked in April. If you are being taxed a hefty amount for your assets, you may as well gift some of them to your children or dependents. This is absolutely legitimate and non-taxable up to $14,000 per annum. Minimizing taxes by gifting assets is a brilliant way to save up on taxes for owners of large estates.
Once you are clear about your deductibles, take a glimpse at your investments to ensure that they are not being taxed unfairly. Adopt intelligent, lower taxed compatible alternatives that will help you reap rich dividends.
Regularly review your investments
It is imperative that you analyze your investments frequently so that you get the maximum benefit out of them. It is prudent to go through them thoroughly while you review your tax returns. Moreover, if you are a business owner or are a freelancer, review your retirement plan and carry out any requisite adjustments to ensure that you are on the right path.
The overall aim of planning for your tax liabilities is to take a bird’s eye view and minimize your taxable income and assets. Ensure that your review is as extensive as it can get. Be as thorough as you can be and believe us, you will be rewarded immensely.
Professional tax planners
The taxation laws are complex and are updated every year. So, with the services of a professional you can get the optimum benefits. Advanced accounting is aware of the federal and tax laws, regulations and loopholes. Your tax consultant should be cognizant of the latest developments and passionate about his work.
