Nov 21 3 Smart And Totally Legitimate Ways To Reduce Your Income Taxes
When it comes to tax related issues, you have no other choice but to seek out a tax professional. Depending on the complexity or severity of your tax situation, you can either use career bookkeepers or professional accountants. But you have to remember that career bookkeepers are not qualified to handle sensitive or complicated tax issues. Actually, all accountants can do bookkeeping but career bookkeepers do not qualify as accountants. CPAs are expert accountants who are certified by the National Association of State Boards of Accountancy (NASBA) after fulfilling the required set of academic and licensing credentials. CPAs are mainly involved in the preparation and review of complex financial statements, preparation and signing of tax returns, and the representation of taxpayers before the IRS during tax audits. CPAs are revered because they are the only accounting professionals — together with tax attorneys and Enrolled Agents — who can represent a taxpayer before the IRS. But even without the help of any of these tax professionals, you can still adopt a few simple tax saving strategies to boost your net income.
Use Tax Write-Offs And Deductibles
Tax write-offs and deductibles are special expenses that are legally exempted from taxation by the IRS. Tax deductibles are divided into two main categories. There are the well-known tax exemptions like mortgage payments and medical covers and the relatively obscure deductibles called income adjustments. The latter category features nearly two dozen above-the-line expenses; and they are all actually deducted or subtracted from the pretax gross before taxation. They include tuition & fees, self-employment tax & health insurance, qualified educator expenses, job-related moving expenses, alimony payments, student loan interests, contributions to a traditional IRA, and many others.
Invest In Subsidized Low-Tax Options
Before you delve into the intricate world of finance, it’s important to have rudimentary knowledge of the key players in the investment world. These are the characters you will need for professional guidance as you try to earn an extra buck on your hard-earned cash through investment. One of the most key determinants of investment success is your tax policy. Professional tax accountants can guide you to a very favorable tax policy, which includes the adoption of tax-incentivized investment options such as home ownership, retirement savings, mutual fund distributions, philatelic materials and other collectibles etc. And whereas interest on bonds and income from rental property are taxed at higher ordinary rates, municipal bonds, qualified dividends earned on stocks, and stock mutual funds are taxed at lower rates. Also, capital gains are taxed at a higher rate in the short run to encourage long-term investment and capital losses are deducted before taxation.
Avoid Tax Penalties And Refunds
In order to streamline your taxes and even save on them, you will need the help of a professional Clifton NJ business consulting and tax accountant. In addition to their basic bookkeeping credentials and qualifications, accountants are also required to pass various specialized tests which are all focused on professional accounting principles, rules and regulations including the Generally Accepted Accounting Principles (GAAPs) created by the Financial Accounting Standards Board (FASB). Among other things, these invaluable tax professionals will always insist that you file your taxes on time to avoid penalties and to do them accurately to avoid refunds. Essentially, refunds are overpayments in income tax that are returned to the taxpayer after a period of time. In the financial sense, a tax refund seems like an interest-free overdraft or loan to the IRS by a taxpayer. This unproductive money could be invested elsewhere at a profit.