Legal ways to avoid paying too much tax

Thursday, February 21, 2013

Legal ways to avoid paying too much tax

Paying Taxes is inevitable. No matter which country you live in, you have to pay taxes if you get more than a certain threshold income.

However, there are some easy ways by which you can avoid paying too much tax.

1. Take control of your finances: Many Americans do not know how much they receive and spend till the last day on which they file their taxes. If you are one of them, then this is the time to take control of the situation and start paying more attention to your books.

2. Spend wisely and save for future: Most government regulations incentivize people to save for their future. It is crucial that we start saving now than later. It has double benefits-

a.                   You are saving money for your retirement

b.                  You do not pay taxes on income that is saved for future expenses. Your 401k plan falls into this category. Investments and Insurance also come into this category.

3. Get Expert Advice: It is a good idea to get expert advice from someone who understands Tax laws. Every person's financial planning is different. It is based on people's income, expenses, future plans, current liabilities, and external environmental factors. Yes, financial advisors may bill you some fees. But they will save you quite a lot of money which you might not be able to stop if you do not use their advice. Talk to your friends, and co-workers to see if they can recommend someone. You may want to check the internet and get opinions about them. Also, you may want to see specialized websites to find a CPA.

4. Educate yourself: You are the most motivated individual to keep your own taxes. Therefore, it is always a good idea to have a proper knowledge about basic business structures, as well as some valuable Tax benefits. Some CPAs or Tax firms offer one off counselling session on the phone or in person. You should utilize this service and educate yourself by asking them Tax related questions.

5. Change the income mix: Different revenue sources have different tax rates. For example, income from investments is taxed at different rates than that from your monthly paycheck. Income earned from the business can provide you to pay lower taxes because of the deductions from business expenses.

6. Charity: Did you know that any money that you spend on charitable causes is Tax deductible? You should keep track of all your charitable expenses and hold them in deductions on your Tax Return.

Author Bio:

Sandeep Chauhan is a Marketing enthusiast. Sandeep is responsible for Product Vision, Marketing and Technology at Best tax Prepares helps consumers to find California CPA tax professionals who are trained in specialized skills.

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