4 Ways to Save on Your Taxes

As we kick off the new financial year, small businesses and enterprises should already be thinking about how to plan their business in order to minimize their tax liability. For many business owners, taxes are a major source of stress and worry, so by starting to plan your tax strategy early in the year, you can ensure that your year end goes smoothly later on. Here are some of the best ways in which you can minimize your tax liability for this financial year.

1. Make employee reimbursements accountable

If you include reimbursements for things like travel, entertainment and sustenance in an accountable format, these will not be treated as additional compensation. This means you can reduce your employment tax liability and your employees will be happy too, because they will not have income included on their own tax forms for the reimbursements they receive. As well as the usual expenses, you can consider including things like employee uniforms, tools and other incidental items.

2. Keep all receipts relating to your car

If you run a car, van or truck for business purposes, you can use the fixed mileage allowance set by the tax authorities to calculate the available write off figure for your use of the car. However, the option to this is that you can offset things like fuel, repairs and maintenance of the vehicle but exclude the mileage calculation. By keeping all your receipts and invoices for money spent on the car, you will be able to make an assessment at the end of the tax year as to which route works best for you. Whichever way you decide to go, you will need well documented records of driving usage including odometer readings and dates, so keep a good record throughout the year to help with end of year calculations. In addition to this deduction, you can deduct payments for parking fees and any toll charges from your taxes, as long as you have kept all the receipts and proof of payment.

3. Employ your kids

If you have children who help out with the business, put them on the payroll. Kids over 16 have a tax free allowance equivalent to that of an adult, and the money you pay them is a tax deductible business expense. As well as benefiting your company financially you will also be able to get work done that needs doing, whilst teaching your children the value of hard work and responsibility.

4. Change your accounting and business type to suit your needs

There are a number of different ways in which companies can account for their businesses. Sole traders may be better off as limited companies, companies that manufacture goods may be able to change the way they account their inventory and small businesses need to consider whether their staff are better off as freelancers, PAYE employees or on short term self employed contracts. To get the inside track on what will work best for your business, it’s a good idea to enlist the support of an accounting professional who will already have a good understanding of tax rules and how businesses can benefit.

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What is the Federal Fresh Start Program?

The IRS created The Fresh Start program in early 2011 to help aid struggling taxpayers. They expanded the program in early 2012 to provide even more relief for people who are mired in tax debt. Here are the relief programs offered under the original and the new Federal Fresh Start Program.

Penalty Breaks

Taxpayers who were unemployed for at least a month in 2011 or before April 17, 2012 are exempt from failure-to-pay-penalties as long as they pay their taxes before the federal deadline. Additionally, taxpayers who qualify for this program can get a six-month extension before their taxes are due. The 2012 due date for the extension is October 15. This program is also available to anyone who is self-employed and experienced more than a 25% reduction in income.

Payment Agreements

If you cannot pay your entire tax bill before the federal deadline, you may qualify for an installment agreement that allows you to set-up a payment plan with the IRS. The only conditions are that you can own no more than $50,000 in taxes and you have to allow the IRS to withdraw money from your bank account every month. The penalties are for doing this are lower now, although you will accrue interest. Small businesses are also eligible for an installment agreement if they owe less than $50,000 dollars or they can lower their debt to under the $50,000 threshold.

Offer in Compromise (OIC)

You may actually be able to pay back less tax than you owe under the Fresh Start Program. The IRS determines OIC eligibility based on your income and personal assets. If the IRS feels you can pay your debt in full or with an installment agreement, you will not be eligible for the tax reduction.

Tax Liens

If you do not pay your taxes, the IRS can put a lien on all the property you own. Starting in 2011, the IRS raised the dollar amount of taxes you owe before the file a lien. They also streamlined the lien withdraw process internally so that if you do encounter this problem, you can get the lien withdrawn quicker after you settle your debt. Additionally, if the IRS does put a lien on your property, you can have it removed it you enter into a payment agreement.

Believe it or not, the IRS is not out to get you. If you are having trouble paying your taxes, visit irs.gov. The IRS website is home to volumes of advice on how to deal with your tax problems including the forms you need and even a series of eight YouTube videos on how the IRS handles collection efforts. Do not wait until it is too late, visit the IRS website today and see what kind of help you qualify for.

About the Author: Julio Pasco is a personal consultant who helps his clients with budgeting and day to day tasks. He spends a lot of time looking for discount and coupons for area attractions so that his clients can learn to save while still enjoying life.

Knowing the tax debt solution secrets that your attorney may not disclose

As an increasingly large number of taxpayers in the US are defaulting on their tax payments, they found out that owing money to Uncle Sam can become a significant problem in the long run. For all those people who fall in the low income bracket, tax debt can be easily avoided but if they do, it should be dealt with quickly and smartly. The problem of unpaid tax debt can soon spiral out of control if not addressed properly through the debt solutions that are available for the debtors. While you may get help from a tax attorney during the tax debt negotiation process, you can also take some DIY steps to avoid being charged unnecessary fees and charges. However, there are some secrets that your tax attorney may not want you to know. Read on to know the tax debt relief secrets that can open your eyes and prevent you from paying the tax lawyer to do work that you can do yourself.

The data entry clerks work on the debtor’s delinquent tax case

When a person is drowning in a sea of IRS tax debt and is also receiving harassing debt collection calls, he becomes desperate about paying back the money by getting help of a tax attorney. They think that negotiating delinquent taxes is beyond their ability but the actual fact is that this work is done by the data entry clerks and not by their tax lawyers. That only a tax attorney can resolve tax issues is a wrong notion that most tax debtors harbor. No one will inform you that majority of the paperwork is prepared by the data entry clerks and the so-called ‘tax lawyers’ simply type the data into the IRS form.

The fees charged are based on how much you can pay and how urgent is your case

You may not be aware of this but the fees that your tax attorney charges you are entirely based on the amount that you can pay and the extent of urgency of your tax delinquency case. Your case may be termed as ‘urgent’ if you’re presently facing tax garnishment of your paycheck or have got a verbal threat from an IRS agent. So, only when you’re under the tax levy, your tax attorney will charge you sky-high fees and even demand upfront payment. So, if you want to avoid them, try out the tax debt solutions like OIC or Offer in Compromise on your own.

A tax attorney hardly spends an hour working on your case

When you’re looking for debt relief options to exterminate your IRS tax debt, you should take wise decisions so that wrong steps don’t dig you further into the debt hole when you’re already defaulting. Most debtors can never talk to the actual attorney because this may take double time than what they spend for your case. If you give a glance at the Offer in Compromise paperwork, you’ll understand. The seemingly-complex forms only contain data about your car payments, electricity bills and address, which is the exact information that you provided to the tax debt firm. Do you need a tax lawyer for the data-entry work? Bet you wouldn’t, that too in lieu of heavy charges!

Therefore, when you missed your IRS tax payments and have amassed a huge amount to be paid at once, negotiate with the IRS representatives on your own. Look for worthy tax debt solutions and take the steps on your own to avoid being subject to outrageously high fees from the tax attorneys.

Simple Tips To Help You Save On Taxes At Work

If you want to reduce the amount of tax you pay, you should let your employer cover some of your expenses.

By simply allowing your employer to cover your expenses with pre-tax dollars, you will be able to save hundreds and sometimes even thousands of dollars annually.

The best way to save on taxes.

Make arrangements with your employer to pay for some of your expenses every month. Ask you employer to pay for an expense straight up. Any employer will do this because, a) Its a wonderful thing to do, and b) The expense will be a deductible expense which can be deducted when calculating taxes.
Case  Study
Pretax Expenses

Assuming your income tax bracket is 25 percent and you pay a monthly rail pass of 100 dollars out of your after tax dollars. This means that your income was 133.33 dollars but 33.33 dollars was deducted as taxes before you could put your hands on it and the remaining 100 dollars is what you withdrew from the bank account for your monthly rail pass.

If you asked your employer to pay for your monthly rail pass using pretax dollars, only 100 dollars of your income will be used. This means that you will save 33.33 dollars every month or 400 dollars annually.

All you have to do to save on taxes is to identify expenses that your employer can pay for you using pretax dollars and contact human resources to see how the company can help you.

Don’t Waste Your Tax Refund: Make it Work for You

If you are one of the several million Americans who is anticipating a sizable tax return refund this year, then you know how very exciting the prospect can be. There are just so many things you can do with that lump sum of cash, right? However, the truth is that most people have great intentions for how they will make use of their tax refunds, only to put it into the checking account and watch it dwindle away on trivialities. The only way you can avoid this situation is to put some careful consideration into how to best reap the rewards of paying your taxes all year. Don’t waste your tax refund. Instead, make it work for you. Here are some ideas for how:

Retirement savings plan. Tax refund time is the perfect time to set up your 401K. Make an appointment with a financial adviser to size up your options (or take advantage of your employer’s 401K program, especially if your employer offers company matching). Contribute as much as the program of choice will allow for, or the total amount of your refund – whichever is greater.

Investments. Have you always been interested in learning how to grow your money through investment instruments? Well, now is the time to do it. Again, this is where a good financial adviser comes in. Weigh out all of your options carefully, and if you have enough money to break into more than one investment, experiment diversifying with some high-risk and some low-risk investment vehicles.

Getting out of debt. Is your mounting credit card debt beginning to eat up the money you could be putting toward saving and investing for your future? Then before you even consider using your tax refund for anything else, pay off that debt! Think of it this way: all of those fees and interest payments will compound the amount of money you owe over the long run – and that equates to more debt than any interest you’d make on an investment.

Your goals. Is there something you’ve been wanting to do for a long time that you just haven’t had the funding for? Perhaps it’s a small business venture, or even a European excursion. Consider your goals and dreams in life, and then consider how much they might cost you. It could be that tax refund time is the perfect time to have the experience of a lifetime.

As you can see, your tax refund can be a great opportunity to get ahead in a number of different ways. Consider these smart choices when you get that long awaited check in the mail, and make this year’s tax refund really count.

About the Author: Jamey Vazguez applies her tax refund to her investment goals and retirement plans every year. She usually keeps about $100 and applies it to some of the best Los Angeles deals she can find, to treat her family, but the rests is invested in her future.