Tips And Tricks To Planning Your Personal Income Taxes

Although planning is something that is common and expected of businesses

, the activity is yet to gain popularity when it comes to dealing with personal income. However, this should not be the case. Individuals need to plan and budget for their taxes just like businesses do.

Why?

There are many reasons why planning is something that everybody should take seriously; here are four of them:

* Budgeting for your financial obligations means that you will be able to meet them without damaging your financial stability.

* It facilitates compliance of laws and consequently avoidance of penalties.

* It enables you to submit your returns within the required time.

* Personal Income Tax Planning helps minimize your liability.

To attain their goals, individuals need to understand that they can save on the amount of taxes to be paid, while at the same time ensuring that they do not fall on the wrong side of the law. Here are 4 tips that will help any taxpayer to plan:

TIP 1: Maintain Proper Records

Always make sure that you keep safe all the documents that you may need in the process of filing returns. Items such as acknowledgments of contributions to charitable organizations, receipts for payments to health insurance companies, receipts for contribution to pension plans and so on must be kept in a safe place at all times.

TIP 2: Submit Your Returns Early

Submitting your returns early will not only help you avoid the headaches associated with filing returns with a fast approaching deadline, but it will also help you receive your refunds early. Some people argue that you should not submit the returns early so that you can make some money from the interest. Though this advice works well in theory, the practical side is completely different. In many cases, the interest amount is usually too little to warrant your attention.

TIP 3: Budget for It

For people who run their own businesses, there is always the temptation to procrastinate budgeting for taxes in the hope that future income will be big enough to carter for future and current obligations. What happens then is that people find themselves owing the IRS a lot of money that they cannot afford to pay. Always budget for your taxes and set aside some money to meet these obligations.

TIP 4: Understand Laws and Their Implications

One of the main reasons for tax planning (though not the only one,) is the minimization of liability. To minimize your liability without landing yourself in jail requires a thorough understanding of existing tax laws and their implications. If you are handling your own tax issues, you need to know the loopholes that you can use safely and ethically. If you cannot do it, it is advisable that you get in touch with a qualified professional who will help you avoid paying what you do not need to pay.

Tax planning is not something that you should procrastinate. You will have to face it at one time or another. After all, there is nothing as certain as death and taxes; you had better plan for them.

by: David de Souza

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