How to Pay Less Taxes?

Posted: January 1st, 2010 | Author: admin | Filed under: Taxes | Tags: income tax, income tax return, IRS, pay less taxes, tax refund, Taxes |

Did you know that there are a number of ways to make your current income tax a bit easier on your pocket? No, evading your tax or finding loopholes in the tax is out of the question here. The key to reducing the income tax you pay is to increase your tax refund. To be able to do that, you need to manage your taxable items efficiently. Here are a few tips that can help you raise your tax refund while completing your income tax return.

1. Keep and organize your tax records.

While most experts advise you to keep your tax records for up to three years, it would be much better to keep duplicate copies of your records so that you can refer to the records when you need them. This will make it easier for you to file your income tax return.

Don’t forget to keep your tax records updated. Why do you have to do so? The Internal Revenue Service (IRS) might cast doubts on some items on your tax return, and you might be required to pay penalties or additional taxes for items that do not have supporting documents. Make sure that your tax records are constantly updated so that you will be able to explain any item that the IRS might find questionable.

2. Observe deadlines.

Make sure you submit your tax returns on or before the deadline set by the IRS to avoid penalties.

3. Keep records of your medical expenses.

The premiums you pay for your dental insurance, health insurance, and other medical expenses may be deducted from your tax. The deductible amount is up to 7.5% of your income. Records of your medical expenses such as statements and invoices that are not covered by your medical aid should be kept and organized so that you can get tax deductions for such expenses.

4. Keep track of your business-related commuting costs.

Expenses on business travels are completely tax deductible. These expenses include travel costs for conferences and seminars such as parking fees, hotel accommodations, tips, tolls, car rentals, and airfare. The costs of commuting to work, however, are not tax deductible since they are considered personal expenses, not business expenses.

5. Wait for your refund instead of filing for refund anticipation loans.

It pays to wait until your tax refund arrives rather than to apply for a refund anticipation loan with high annual interest rates. The interest rates on such loan typically range between 50% and 500%. You might end of using most of your tax refund to pay off the loan.

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