6 Tips for Smart Tax Planning: Maximizing Your Returns

Nobody likes paying taxes, it’s a fact.

Why would anyone?

You work your entire life just to give half of it away to the government.

However, there are ways around taxes that are perfectly legal.

Most people think that the only way to get out of paying one’s taxes is to commit tax evasion but this is not true.

If you are interested in learning about loopholes you can use to reduce the amount of tax you have to pay, this post has you covered.

Here is everything you need to know:

Applying for Refunds

It is very common for people to overpay their taxes.

If you have ever overpaid, you could be entitled to a tax refund, which you can apply for on your own or with an accountant’s help.

The process of applying for tax refunds can be somewhat complicated though, as you’ll have to go through all of your previous tax returns and compare them against your salary at the times they were filed.

An accountant will be able to do this more effectively than you will.

It should be noted though, if it turns out you are not eligible for a tax refund but you have hired an accountant, you will be even further out of pocket, as accountants are not cheap.

In fact, some are downright overpriced.

Find the most affordable accountant you can if you are planning on searching for potential errors in previous tax returns.

Claiming Expenses

When you are filing your tax returns, you can file for expenses.

Most experts in taxes say that you should maximise your expenses, meaning specifically buy things and go places that are going to cost money, so you can then file them as tax expenses.

If you are going to have to pay your taxes anyway, it does not make sense not to claim extremely high expenses.

Claiming expenses will help you to save a lot of money on your return that would otherwise have been lost to the IRS.

There are limits to what you can claim as an expense, though.

Reliefs and Allowances

Every so often, reliefs and allowances are introduced to help people who’re struggling with certain living conditions.

Of course, finding these reliefs and allowances can be difficult, so hire an accountant.

While these things are released on a regular basis, they tend to be buried.

Burying them allows the IRS to reduce the number of people that apply for things.

If you are interested in potential relief and allowances but do not have the money to hire an accountant, conduct extensive online research and you should be able to find out a thing or two about them.

Unused Allowances

Did you know that, in some cases, you are able to use unused allowances on previous returns?

In other words, you can amend returns you filed in the past and add unused allowances to them.

Once amended, you will receive a tax rebate.

Bear in mind though there is usually a time limit for this. If you plan on doing it then you usually only have around two years from the return’s original file date.

Leaving it longer than two years means you won’t be eligible.

Paying Taxes On Time

Make sure that you get into the habit of paying your taxes on time.

Not paying your taxes when they are due can be disastrous.

People receive massive penalties for such behaviour.

If you do plan on paying taxes late (because you do not have enough money, for example) then you need to make sure that you get in touch with the IRS and tell them.

If you do not tell them then they won’t be able to accommodate you and, most likely, will issue a fine of some kind, as they do not look fondly upon people who do not pay their taxes on time.

Avoiding Underpaying

Lastly, avoid underpaying.

Underpaying your taxes can be a very bad idea.

If you get into the habit of underpaying then the IRS will fine you.

People who do not pay the full amount of taxes that they owe are usually issued massive penalties.

These penalties increase exponentially if you do not pay the full amount within a fixed period of time.

Interest accumulates over time and the original amount owed can be doubled or tripled.

To avoid underpaying, ensure taxes are filed on time, and through official channels as they are supposed to be.

When you have to pay your taxes, it’s normal to be a little annoyed.

However, just because taxes are excessive sometimes, they are an unavoidable part of life and something you just have to come to terms with.

You can use this post to save money on them.