Tax filing - Some things to remember

The last date for tax filing this year is fast approaching and I am sure lot of people will be now breaking their heads to find out ways to save tax paid to the government. Though its bit late for any major changes to your tax amount this year, proper planning and following some of the below guidelines would save you lots next year and years coming. Some points may be applicable for this year as well.

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  1. If possible start your own business. This could save you in thousands in the way of deductions.Talk to your CPA to find out ways of saving tax with your own business.
  2. If you already have a business, keep all business-related receipts. Keep track of what the receipts are for, and save them in a safe place.
  3. Itemized Deductions - Many times you could pay less tax if you do a itemized deductions than standard deduction.This is a must if you own a home as lot of things that you do for your home can be tax deductible and of course the mortgage part as well.
  4. Take full advantage of IRA or other retirement plan contributions by putting maximum into it. One of my friend who had two earning members in his family, put $10,000 this year and he saved a flat of $6000 in terms of taxes. That was amazing savigs!!
  5. 2008 was not a good for your investments. So if you had made a loss, do not forget to include it in your tax returns. Also, remember that you can carry forward up to $3,000 from previous years’ losses.
  6. You can take advantage of lots of tax-free investments. Though you may not get good returns out of it, its a very safe investments. Some examples are government or muncipal bonds. These type of investments are good for high-income individuals.
  7. For each child less than 17 years old, you are eligible for $1000 credit,so do not forget to get those if you have a child. There are also various other credits, such as those available when you adopt a child or when you elect to claim a Lifetime Learning Credit.
  8. Do not forget the donations that you can make all through the year. It could be for some charitable institutions or to some religous temples.Keep a track of all the donations that you make. If you have a old car, you may get more in terms of tax savings if you donate it than by selling it.
  9. Gift if you can. You can give up to $12,000 away tax-free to each person you choose. This is typically for retirees with significant assets who want to gift money now, rather than leave it for estate taxes later.
  10. If you have some children under 14 years, try to put them in a payroll, by which you could shift some of your high taxable income to lower tax bracket.
  11.  Last but not least, do not forget to double check your tax work before actual filing. Millions of Americans pay more tax unknowingly than they are supposed to pay!

I always recommend to file your taxes through a CPA or at least use some good software Turbo Tax  since you can take full advantage of any tax saving scheme that you may not be aware of.Also please double check the above mentioned points before you actually file your returns since government rules change.

Author: pradeep