managefinance.net » Tax http://managefinance.net Your Managing Financial Site Sat, 15 May 2010 03:31:02 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 How to Pay Less Tax http://managefinance.net/how-to-pay-less-tax.html http://managefinance.net/how-to-pay-less-tax.html#comments Wed, 12 Aug 2009 10:46:03 +0000 admin http://managefinance.net/?p=53 Everyone wants to know how to lower their tax liability. None of us want to pay more tax than we should, and most of us want to avoid paying all we can. There are complicated methods of tax avoidance given any particular tax situation, but such complexities really only apply to a minority of taxpayers. Most of us need some simple advice on how to save paying tax, if we can.

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If you want to avoid paying more than you should have to, the simplest way is to pay your taxes on time. Interest, penalties, and fines accrue starting on April 16. Filing a late return can actually cost you some deductions and tax credits. Certain deductions, credits, and exemptions are not allowed when filing a late return. Being on time is no joke; it can save you money and help avoid a lot of hassles.

Use retirement plans to reduce your current taxes. Many retirement plans are pre-tax, so you do not pay tax on that money until it is withdrawn. Most likely, you will withdraw that money in retirement, when you no longer have as high or as steady an income as you do now. Under those circumstances, the impact to your taxes will be greatly reduced upon withdrawing. Save money on your taxes now and consider a Keogh, SIMPLE, or SEP plan for saving more tax-deductible dollars than a standard IRA. Talk to a financial consultant about the benefits of these plans.

Keep good records for your home and business. Good, organized records will help you to track your personal and business expenditures to ensure that you get every deduction, exemption, and tax credit to which you are legitimately entitled. Hang on to these records for at least three years and in the case of appreciating assets, hang on to them much longer. Save all your receipts and records of expenses to support your deductions in case of investigation or audit by the Internal Revenue Service.

If you have a part time business, run it as a professional endeavor. Keep track of all business related expenses and income. If your part time business suffers a loss, that loss is deductible from your income taxes. Be sure that you can prove you had a profit motivation if your part time business suffers losses. The Internal Revenue Service will not be happy if they expect you ran your part time business half-heartedly, simply to incur a loss.

Who wants to pay taxes more than required? You are always looking out for tips to reduce your tax payments. Here are some useful ones to save you money given by Chintamani Abhyankar.

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