Saturday, December 8, 2018

Taxes and Planning the Right Way

History of Taxes

Taxes make up a large amount of revenue for the United States government and is funded by the American citizens. Income tax is just one of the many taxes Americans must pay by law and became the 16th Amendment on July 2, 1909, and it was ratified on February 3, 1913. 

The Civil War was one of the earliest wars in American history to use income tax when Congress passed the Revenue Act of 1861. This tax was implemented on the American citizens to fund the Civil War. Originally it was used only during wartime. However, 1913 was the actual year it became law. 

The federal government taxed all income from individuals overriding the state government. These taxes also funded World War I and World War II along with every war that followed in American history. The government is meant to take the tax money and use it for what the people want the government to do for the benefit of all citizens.

Who Pays Income Taxes

Any American citizen who makes over $10,000 single, $25,000 married, or $400 working for themselves has to pay income taxes. Many Americans over pay and at the beginning of the following year, they get some of their money back through income tax refunds. Tax Planning is one of the ways that Americans can stay on top of how much taxes they owe versus how much will they get in return from the government.

Why a Tax Professional?

In many cases of tax planning, the process can be very difficult and confusing. One of the worst types of mistakes to be made by any citizen is on our taxes. This is the biggest reason we use tax professionals to assist us with all the paperwork and advise us of any updated tax laws and exemptions. 

This can save a lot of time and a lot of headaches. It can also save us a lot of money, even though we have to pay for their services. To spend a little money can save us from being audited, stiff penalties and fines, high-interest rates, and possible jail time if the penalties and fines cannot be met. All these are good reasons to let a professional handle the issues so that no mistakes are made.

How to Pay Fewer Income Taxes

There are many different ways the government gives us tax breaks when paying income taxes. All of these are known as tax deductions. One can contribute to a donation, 401K, or any retirement fund. Most college students pay on student loans. 

As long as the loans are being paid back monthly the student will have this for a tax deduction. If anyone buys a home, that is one of the biggest tax deduction through the interest payments on the mortgage. Many people itemize all their purchases throughout the year by saving every receipt.

Another way is through having the taxes prepared by a professional. This can help in two ways. One is, the money paid to the professional can be a deduction if the party is itemizing, and the other way is that the professional will know all the current laws and can get the best possible result for any refunds. 

There is also some beneficial reasons to discuss with a professional the future and taxes. This is a good strategy to get started on early so the tax collectors can stay away from knocking at one’s door for the government’s money. 

Sometimes a tax professional can be a financial advisor who can assist with information to pay less as the client gets older. This can help in the planning process, not just from the required year to year, but can paint the whole picture of a strategic plan for an individual in the future.

Tax Planning and the Future

One can always do things on their own, but one of the things that can be most beneficial is the fact that having assistance gives the upper hand to having that second eye overseeing things that can be missed. The advice is priceless, but the goal of tax planning is for the future and that is where stability must be foreseen through it all.

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