One of the most tedious exercises that most people have to do in their lives is to complete and return tax forms for the government. Unfortunately, we have no choice! Some people will use the services of an accountant to do this for them, but the vast majority of people will be faced with the task of doing it themselves. On the positive side, this annual procedure empowers us with a clearer understanding about our personal financial situation and as a result of that, we take back more control of our lives through our finances.
For most people, the payment of tax is their largest expenditure in the year. As a consequence of this, the wealthier people in society invest a lot of time and energy (and money!) on reducing their tax commitment wherever possible. For the vast majority of people the amount that we have to pay in tax will fall anywhere between 15% and 55% of the money that we have earned over the year. This is a huge proportion of our income and has a significant impact on the amount of usable money we have for other aspects of life.
For anyone who receives a paycheque, it is not uncommon for them to be totally unaware of the amount of money they are spending in tax each and every month. Few people pay much attention to their payslip and are only concerned with the bottom line, i.e. how much disposable income they have. Because of this, it is vital that people become more aware of how much tax they are spending and to see if they can reduce their tax commitment legally in ways and means that they may not even have considered were possible.
There are three tax calculators online which can help to give you a rough idea of your tax commitments – for example – Free Income Tax Calculators, W-4 Calculators & Health Care …
“Free tax calculators and tax estimators by H&R Block including a W-4 calculator and health care calculator. Estimate your taxes with one of our tax calculators.”
But this is obviously only an estimate and more detailed analysis needs to be form.
When looking at an financial situation in detail and through observing some simple considerations and strategies, it soon becomes evident of how much each one others can save in tax with very little effort.
Here are some other things to consider to help reduce your tax bill;
The very first thing to do is to educate yourself a little bit more about your tax situation and your obligations and the types of rebates and exemptions that are available for someone in your situation. You can easily find this information online or from the local tax office or even your local library . By obtaining this information you are in a much more informed and strong position to then go and consult a tax adviser. By being more informed you would have to spend less time with a person and as a consequence of this, save yourself some of the fees that would be levied for their services.
Here are a couple of examples of sources information online to help with education about taxes;
U. S. Master Tax Guide (2014)
CCH, CCH Incorporated, published 2013, 1008 pages
Your Federal Income Tax For Individuals – TAX GUIDE 2014
You would then need to go and consult a Certified Financial Planner to find out exactly what your situation is. Many people are put off from doing this thinking that it is very expensive. However, this is a false economy as the fees that you will pay to such a professional will soon be outweighed by the amount of savings that you can make by implementing their advice. The vast majority of people are totally unaware of the range of expenses that they incur week-in week-out that can be offset against their tax bill. Your financial adviser will be fully aware and up-to-date in these matters and will be able to advise you accordingly.
One thing that many people fall down on is the discipline of maintaining adequate financial records. Many people think that this is just for businesses but that simply isn’t true. Anyone who is having to fill in a tax return form will also have to to declare their payments and receipts. Only through the maintenance of detailed financial records can you begin to have a full understanding of what you’re financial situation really is. Fortunately, this whole process can be made very easy through the use of a simple accounting software package, many of which are totally free. This way you have an immediate picture of both your expenses and your income.
Here is an interesting article about saving tax;
Three Last-Minute Tips To Save Time And Money This Tax Season
MarketWatch, on Tue, 14 Apr 2015 -One in five households waits until the April 15 deadline to file federal and state taxes, according to the IRS. Research shows that last-minute filers often fall victim to common tax errors like …
As more and more people are working from home and are self-employed, it is vital that they become fully aware of all of the monthly household expenses that can be used in consideration of their final tax bill. For anyone using a room as an office in their home, a proportion of most of the household bills can be used against income. Understandably, this can have a huge impact on the amount of tax that has to be paid at the end of the year.
Another important consideration is the Medical Flex Plan and the 401k. If any money is being put to one side for the 401k this too can be offset against income. In addition to this, The Medical Flex Plan enables all medical costs to be paid without tax.
These are just some of these simple considerations that we need to take into account when assessing our tax liabilities. There are many more ways of reducing tax, and your tax adviser is worth his or her weight in gold when it comes to accessing this information.
You will be very pleasantly surprised exactly how much money you can save when exercising some of these very simple strategies and soon discover that your tax liabilities can be significantly reduced with very little effort.
Below is a useful video explaining how to fill in your income tax return form (US);