You want to pay as little income tax as possible – or receive the most money back if you are due to receive a refund. Filing taxes on your own takes a lot of research every year to ensure that you don’t pay more than you should. Tax deductions and credits change frequently, and if you miss out on just one, it could cost you hundreds of dollars – in some cases, thousands of dollars.
You can minimize your tax bill or maximize your refund by ensuring you take advantage of all the ways to reduce your tax bill. Business tax attorneys can help ensure you take advantage of these ways, whether you use them for personal or business taxes.
A tax deduction offsets your income. You receive the discount by applying the percentage of your top marginal tax bracket to the deduction amount. If the tax rate is lower than the percentage, it’s better to take this as a credit, rather than a deduction. However, if the tax rate is higher than the percentage, taking it as a deduction saves you more.
Tax deductions reduce your taxable income. You need to take all of the deductions you are entitled to. For example, if you are self-employed and have a home office, you have many deductions that a W2 employee doesn’t have. Take advantage of the home office deduction to reduce your taxable income.
A tax credit offsets tax liability dollar for dollar. If it is a refundable tax credit, you receive a refund for part or all of the amount of the credit that is more than your tax liability. For example, if you can take a credit for $5,000 and you owe $4,000 in taxes, you would receive a $1,000 refund.
If you travel for your business, you can deduct travel expenses. If you are reimbursed for those expenses, you cannot deduct them unless you are a qualified performing artist, an armed forces reservist, an employee with work expenses that are related to an impairment or a fee-basis state or local government official. Determining deductible expenses is often difficult because of the rules surrounding deductions. The tax attorneys at France Law can help ensure you take all of the expenses you are entitled to.
Select the Correct Filing Status
How you elect to file has a big impact on your taxes. Be sure to select the correct filing status, whether single, filing jointly, head of household, or married filing singly, to get the best standard deduction. Filing the wrong status could cost you thousands of dollars. For example, if you file single instead of head of household, you could lose nearly $3,000.
Day Care Costs
Don’t forget to deduct daycare costs. For 2022, you can still recover a child tax credit, but this is one of those credits that frequently change. If you are unsure as to what counts as daycare costs, contact the tax attorneys at France Law for a consultation.
Make IRA Contributions
While it’s too late for a tax break by contributing to your work’s 401(k), you have until tax day – April 18, 2023 – to fund an IRA. Those who are younger than 50 years old can contribute up to $6,000, and those who are 50 and older can contribute up to $7,000 for 2022. If you are unsure about how to start a new IRA, tax attorneys can help you.
Consult with a Tax Attorney
As the tax laws become more complex, especially for business owners, you should retain a tax attorney at France Law to help ensure you pay in the least amount that you legally can or maximize your tax return.
A tax attorney often delivers a more thorough look into your taxes. They can even review previous tax returns and file amendments if you or your accountant missed something in previous years. Since tax laws are always changing and becoming more complex every year, contact a tax attorney at France Law Firm to ensure you maximize your tax refund.