Tax Planning Tips

There are many tax planning tips out there but the basic tax plan tip is simple: take your gross income and subtract from it any deductible expenses you will have your net taxable income. However there are other tax planning tips that will help make the process easier, simpler and less complicated. Let’s look at a few, easy tips:

Tax Tip #1 Lower your total tax bill by implementing either a 401k or 403b plan. You can invest up to $16,500 and most likely, more in 2010 and with some employers, this amount will be matched. What happens with this plan is that you can lower your taxable income by $16,500 or more and get a return on your investment and save for retirement.

Tax Tip#2 Checking out Tax Credits such as Child Tax Credit, Hope and Lifetime Learning Credit, Energy Saving Devices Credit or Hybrid Cars Credit. Some of these may be very helpful when planning your taxes.

Tax Tip#3 Check out information on tax deductions such as IRA Accounts, Medical Expenses, Homeowner Deductions and Business and Personal Expenses.

Tax Tip#4 Prepaying Quarterly taxes to the government. This helps take the stress out of paying taxes and is a convenient and time-saving way when planning taxes.

Tax Tip#5 Adjust your withholding. What this means is filling out a tax form that you can download from a IRS website or from your employer. This form—a W-4 form-- takes minutes to fill out and will give you peace of mind when finished.

Tax Tip#6 Throughout the year begin to file any and all tax information into a large folder. As information and forms come in, immediately place them in the folder. When tax time comes, you will have everything in a neat and orderly fashion and with such organization, filing your taxes will be much easier and without a great deal of stress.

Additional tax planning tips that will help when preparing your taxes are: employing a CPA to prepare your taxes-- especially if you have a long list of itemized deductions, are not up on tax law changes and will keep the procedure legal, keeping records that are organized and up to date, making sure to report all income, filing your taxes in a timely manner, and attaching any necessary copies.

Also, if you have a large family, keep a special folder so that everyone can put in their receipts in the folder throughout the year. Even better, file the receipts according to the family member, keep current on the tax code. Changes are made in the tax code often, so be sure to keep current. This will help you to receive tax credits and deductions that you are eligible for. In addition, find out about the American Opportunity Tax Credit. This is a tax credit that helps with educational expenses. The credit amount has been raised to $2,500 for four years.

Finally, if you own your own business and have minor children, they may be able to work for you. They can receive up to $5,000 for the work they do for you without having to pay income tax.