www.taxprofessionals.com - TaxProfessionals.com
Posted by Dennis Jao

Tax Filing Strategies For Individuals

Tax Filing Strategies For Individuals

Just as food, clothing, and housing are necessities, so are taxes. There is no escaping taxes unless you want to go against the law which will surely catch up with you. So it is better to have a plan that will make it easy to pay your taxes. 

Tax planning can be defined as the compilation and tidying up of an individual's finances to optimize tax breaks and subsequently reduce tax issues LEGALLY.

The reality is that tax obligations and regulations can be confusing and overwhelming. However, understanding the dynamics and finding your way around it can make it a walk in the park for you.

Simple Tax Filing Strategies 

Find below the following tax filing strategies.

Know your tax range.

For a start, you must know the tax range category you belong in. You should find out the federal tax bracket category you find yourself in. Typically, America has an ascending tax system. This implies that those with ascending taxable incomes are subject to ascending tax rates, and those with descending  taxable incomes are subject to descending tax rates. The 7 seven income tax ranges are 37%, 35%, 32%, 24%, 22%, 12%, and 10%.

Regardless of the category you find yourself in, you won't have to pay the percentage on your complete earnings because you need to remove tax deductions to know your actual taxable income.

Note- your taxable income is not your total income or salary.

The right authority splits your taxable income into bits and taxes each bit at a corresponding rate.

Understand the distinction between tax deductions and credits.

These two entities can cause a reduction in your tax in various ways. However, you must know the differences between the two.

Tax deductions are charges you have incurred that can be subtracted from your earnings. It reduces the amount of your earnings that are related to taxes.

On the other hand, a tax credit gives you a dollar-for-dollar reduction in your tariff.

Itemizing or standard deduction

You have to decide if you will toll the path of itemizing or use the normal deduction because your choice influences your tariff.

A standard deduction is a flat-dollar tax deduction. Many people prefer this to itemize because it speeds us the whole tax prep.

On the other hand, itemizing means, itemizing your tax return by individually taking all items you qualify for one at a time. Itemizing is time-consuming. 

Additionally, the majority think of itemizing when the itemized deductions are way above the normal deduction. You must keep a record of your deductions yearly.

Regardless of the method you are opting for, a tax advisor might help you choose the deductions suited for you.

Keep appropriate tax records.

You need to have updated tax returns and documents, simply because the IRS might have a tax audit that would warrant access to tax returns of past years. Your account must be updated for that duration. 

Be well informed about well-known tax deductions and credits 

There are hundreds of deductions and credits all over the place. However, they have rules regarding Individuals that are eligible for it. Examples include American opportunity credit, Child tax credit, Capital loss deduction, Medical expenses, and the like.

Failure to implement a tax planning strategy in place makes you at risk of an outrageous tax bill. Because when you are unable to pay your tax on time, the IRS places a penalty and interest on it until the money is paid completely. 

These and more are the various reasons for IRS levies’ penalties.

Delayed payment, failure to file, rejected check, and inability to pay specific estimated tax. 

These and more are why you must ensure that your tax filing strategies are implemented and at the right time.



Dennis Jao
Contact Member