A Beginners Guide To Tax Planning

1
A Beginners Guide To Tax Planning
2

• There are many different tax planning strategies,
  of which a tax professional will happily guide
  you through, but the most basic tax planning
  strategies are designed to reduce the amount of
  your taxable income, and increase the amount that
  you are refunded. Tax refunds are based upon how
  much more tax you pay, than what you owe.
• Tax laws can be complex, and often it can be hard
  to make sense of them, but here is a brief guide
  to tax planning, for those individuals who may
  wish to understand a little more, even if they
  are using the services of a tax professional.

3

• How to plan your deduction method
• You are given a choice when completing your tax
  return, between standard deduction methods, or
  itemized deduction methods, both of which are
  used to determine your taxable income.
• Standard deduction is a dollar amount that the
  government have set, and youre able to claim
  this without accounting for the expenses that
  would usually be associated with a taxpayers
  allowed deductions. Itemized deductions are
  expenditures made for deductible expenses. These
  may amount to more in a tax

4

• year than the standard deduction amount, and if
  that is true, then you will probably go on to pay
  less tax or be entitled to a bigger refund using
  the itemized deduction method.
• The only drawback with using the itemized
  deduction method, is that you must provide
  evidence of receipts and other documents to
  support your purchases. Having said that, keeping
  receipts may also come in handy even if youre
  claiming the standard deduction.

5

• Using tax credits to help reduce your tax bill
• Refundable tax credits can help to lower your tax
  bill by creating a surplus, which then results in
  a refund. If youre on a low income, then you may
  qualify for earned income tax credit.
• You may be able to apply for child and dependent
  care credit, which comes into play if you finance
  the care of children or disabled dependents to
  allow you to work, or seek employment.

6

• Child tax credits of up to 1,000 for dependent
  children under the age of 17, may be applicable
  to you, provided the child, or children, qualify.
  
• If youre on an income below a certain level, you
  may qualify for the retirement savings
  contribution credit, which is over and above
  other tax savings that youve earned from
  contributions to IRAs or any other retirement
  plan.
• American opportunity tax credits reach a maximum
  amount of 2,500 per student that meets the
  requirements, with 40 being refundable, and can
  be used to offset some of the costs associated
  with post-secondary education in the first 4
  years of college or university.

7

• Strategies using retirement savings plans
• Tax reductions now, and income later, can be
  greatly affected by retirement plans, and many
  tax payers turn to them. If the tax rate is good,
  such as 25, then the amount you contribute
  towards a retirement plan can end up saving you
  whole lot of money on your current tax return.
  Unless you withdraw the money in your account,
  your investment earnings will not be taxed, so
  you can see how putting as much as you can afford
  annually, into your retirement account, could be
  an effective form of tax planning.

8

• Other tax savings plans
• Retirement plans may be attractive to many for
  the reasons mentioned above, but there are other
  types of savings plans, that can help you to
  defer tax (and in some cases, even to avoid tax),
  such as 529 college savings plans, health
  coverage savings plans and dependent care savings
  accounts.
• To know more about each of these strategies, its
  best to contact your tax professional, and if you
  dont have one, its highly recommended that you
  find one, well in advance of filing your tax
  return.

9

• At Heyer Associates, we proactively assist our
  individual and small business clients in meeting
  their goals. Our key area of focus is ensuring
  that our clients remain compliant with federal
  and state tax laws by providing them with high
  quality accounting and tax service Coral Gables.
  If you are looking for individual tax preparation
  in Miami, Heyer Associates would be a right
  option.