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Posted by Tiffany Gaskin

Some Tax Tips & Tricks Everyone Should know

Some Tax Tips & Tricks Everyone Should know

There is a lot to be done as an individual or business owner. People juggle between everyday tasks with little or no spare time to file taxes. A tax bill from Uncle Sam can halt business activities for days or weeks. To avoid disturbance from the tax office, here are a few tips and tricks to save the day.

Save for Retirement

Taxable income is decreasingly altered by 401(k) or 403(b), incurred in a retirement plan. These levies are pre-taxed and deducted from your paycheck on a basis. For instance, your traditional IRA deposit is deducted on a pre-tax basis, decreasing your total gross income of the year. Taxes are deducted based on the amount earned and the structure of your retirement plan. 

If you're self-employed, you increase your tax deduction by depositing more on a Simplified Employee Pension account or SEP IRA. This allows 25% of earnings to be contributed to the account until it reaches its limit of $56,000 annually. So, hurry and open a SEP IRA account to start enjoying the benefits.

College Savings 

You can minimize the tax bill by saving more on college fees. For instance, adding more money to tuition funds to avoid additional taxes. Start by ordering a 529 plan. A 529 is a saving plan for students run by the government or educational institution. You cannot circumvent your federal income tax, but you can alter state taxes via the 529 plan. Regardless, the 529 plan also has limitations. For instance, there will be tax consequences if you save more than $16,000 for a beneficiary.

Start Early to Avoid Delays

Starting early is a good tip and trick for filing a tax report. Filing your tax reports could be tough; everybody is figuring out the latest filing requirements. If you're having a problem with your filing system, getting a refund could be delayed. But if you get a W-2 file with a higher deduction and is electronically filed early, you can avoid delays by starting a direct deposit account with the IRS. 

If the process is formidable for you, gather the document and seek professional help. If you start early, there will be time to monitor missing information, conclude on errors, or hire a professional.

Give it away

Donating to charity is a tricky way to avoid a tax bill. The donations may be cash, food, clothes, household items, and so on. When denoted, these items reduce the amount of your taxable income, which reduces your tax bill. 

Save More to a Roth IRA

Focus on depositing more money into Roth IRAs. While the traditional IRAs are taxable, the new Roth IRAs are not. Another upside is that Roth IRAs have no limit on distribution, making it easy to reduce taxes from the tax bill. You can make money from your traditional IRAs account and deposit it in your Roth accounts to harness these benefits. When money is shifted to a Roth account, taxes are charged once on the deposited amount. So if you're looking for a lesser tax bill and have these accounts, it's time to focus more on Roth accounts to avoid tax.

Start a Business

Starting a business has less tax filing. A business can reduce many expenses from income which affects the total taxable earnings. For instance, an employer can decide to deduct tax from employees and add it to the health insurance scheme. However, there are compliances you need to meet before going on with the deduction. 

The IRS also makes guidelines to benefit business owners. For instance, a business owner can deduct tax through home expenses as part of a home office deduction. You can also deduct internet and utility bills from the taxable business income. However, all these deductions are claimable if your business is established to make a profit. You can also check with the IRS for more information.



Tiffany Gaskin
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