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5 Ways To Tackle Individual Taxes

5 Ways To Tackle Individual Taxes

Whenever the tax filing season comes around, many folks are not pleased about it. What comes to mind is a stretch of stressful and sometimes confusing processes that equals money to be disbursed. And it is not far from the truth, especially with the recent (2018 to be exact) adjustments made to the United States taxation laws.

Enlisting the services of an accountant might ease the stress of doing your taxes yourself, but some parts of the process are still up to you to handle. Tax planning or strategizing is part of it. What this does is to help you make full use of the adjustments that have been made to the tax laws, and to use them to lower the amount you’re to pay in taxes, and also increase the amount you’ll expect to get on your returns. 

Do you want to know how you can effectively strategize to tackle and cut down on your taxes this year? Then read on.


Tax Strategizing Defined.

Everyone has different ways of sorting out their finances. But it is best done when you have a good strategy on hand. Tax strategizing refers to the process by which you significantly lower the amount you get to pay as tax by the end of the financial year. Tax strategizing can be done in various ways. But basically, it can be done in three ways: lowering your taxable income, adding as many tax deductions as you can, and finally maximizing your use of specific tax credits.


Is Tax Strategizing Worth It?

Tax strategizing is worth it because it saves you from a lot of stressful and sometimes messy tax filing situations, not to mention saving you some of your hard-earned money. Also, it enlightens you on what best to spend your funds on so that you can get the refunds / benefits associated with them, such as putting aside funds for retirement contributions or furthering your studies as a student.


Ways to strategize for your taxes.

  1. Be aware of your tax income bracket.

This is the very first step of your tax strategizing process. Other decisions you will take are dependent on this. As a result of the 2018 adjustments made to the U.S taxation laws, there might have been some changes made to your taxable income bracket. So you have to find out.


  1. Cut down on your taxable income.

This is the next step in tackling your taxes. This is because your overall taxable income or AGI is what determines, to a large extent, what you pay on taxes. Your AGI is different from your total income. It is what remains after you have made contributions such as your IRA and 401(k), paid interest on your study loan, and the likes. The IRS form 1040 has several variations that you can utilize for this purpose. If it is a bit confusing, you can enlist the services of an accountant. But putting away funds for the contributions listed above is a very sure way to cut down on your taxable income while at the same time securing your retirement years. 


  1. Add as much as you can to your tax deductions.

Here is another way to tackle your taxes. Provisions are made to deduct some expenses from your overall taxable income. This could depend on your profession, donations you made to charity, and other costs. Wherever you can, and you see a provision for deductions, make full use of it. This way, you’ll cut back on the amount you'll have to pay in taxes. You should take note of the times you have these expenses during the year so that when the tax filing season comes, you have a detailed list ready. Also, keeping all your receipts handy would be a good decision. 


  1. Taking advantage of tax credits.

This is where the benefits of tax strategizing come in. Tax credits are similar to bonuses, and they help reduce how much you've to pay in taxes. On the contrary, they do nothing to cut down on your AGI (Adjustable Gross Income), but they are used to deduct from the overall amount you’re to pay as tax. Taking advantage of your tax credits will be a welcome way to help you tackle your taxes, so don’t pass upon them. 


And finally; 


  1. Be accountable and hold firm to your plans.

This means that, concerning plans like saving for your retirement, funds that you keep in those accounts shouldn’t be touched until the set time they are allocated to be used. If in trying to cut down on your taxable income, you put some money in there that you know you might need later on in the not too distant future, then, when you try to withdraw from those accounts, later on, that amount will be added to your taxable income. You will incur additional tax for a premature withdrawal. 

To avoid these, make sure you have a separate savings account where you can put money away for the short term until you need it, while contributions you make to your IRA and 401(k) accounts should be left there till the set time.


So, this sums it up on the five best ways to tackle your taxes to have a stress-free tax filing season.


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