Everyone in the United States can take advantage of several simple tax tips to make April 15 less painful. Tax tips range from common sense to highly complicated. It is important to remember that all U.S. citizens must pay taxes on earnings. Anyone who advises you otherwise is likely encouraging illegal activity. However, there are many completely legal methods for making your taxes less of a burden.
#1 Save Your Receipts
Saving your receipts is the only way to protect yourself in case of an audit. There are other uses for saving these receipts, though, that may get you more of a tax refund. If you are not an accountant, you likely do not know all of the items that can be applied for tax deductions and tax write-offs. Especially if you own a business, there are many small business tax tips that will apply to your daily expenses. Instead of trying to remember these tips and rules, you can simply save all of your business receipts. At the end of the year, turn these receipts into your accountant and let that person decide what can be deducted.
#2 Budget for Deficits
Everyone wants a refund at the end of the year. Even if you are making your monthly withholding, though, there is a chance you will be running a tax deficit. In this case, you will need funds immediately on hand to pay your taxes. Keeping at least 10% of your income in savings each year will typically cover a deficit if you are making monthly contributions. If you are not, consider using an online estimator to determine your tax bracket. Save at least 5% more than your tax bracket requires.
#3 Keep an Eye on Quarterly Deadlines
Independent contractors and freelance agents should pay taxes quarterly instead of only once a year. If you plan on turning in a 1099 or similar form for your wages, keep track of your taxes and of quarterly deadlines. The 15th of April, June, September and January are each separate tax deadlines. If you fail to pay at these times, you may have to pay a penalty at the end of the year. You can use the IRS website for information on how to estimate your taxes each year and each quarter.
#4 Avoid Don't Evade
There are many legal tax avoidance techniques. These practices help you set yourself up in a way that mitigates your responsibility to the federal government each year. For example, certain business will be better established as 401c3 non-profit organizations to have a lower tax liability. Your accountant may provide you with advice on how to minimize the amount you will owe each year. However, if you attempt to evade taxes by not paying the amount you owe, you will be committing a crime. Evasion is a different technique than avoidance; evasion means intentionally not paying taxes you owe. Tax fraud is an even worse offense. Tax fraud is submitting information you know to be untrue to the IRS. Evasion and fraud rarely pay off.