Doing your taxes is never fun. But, it can get a little more interesting if you employ some helpful strategies to make the most of your money, and give the Internal Revenue Service (IRS) only what you are legally required to give.
In this article, we will talk about three winning strategies to help you effectively take advantage of the tax law in your favor. In addition, you may want to consider retaining the services of a Sarasota tax strategy attorney for individuals. If, after reading this article, you would like to discuss tax strategies for your circumstances, we invite you to call the Law Office of Mary E. King, P.L.
The Law Office of Mary E. King, P.L. can make sure that your tax debt planning in Sarasota is resolved efficiently and at the lowest cost to you. Please fill out our online contact form, or call us at 941-906-7585 today.
What Tax Bracket Are You In?
Before getting into the nitty-gritty of the three strategies for tax success, it is important to first understand how the IRS handles tax brackets. We have a progressive tax system in the U.S., which means that the more income you have, the higher percentage of taxes you pay. There are seven federal tax brackets currently. In order from lowest income earners to highest, the brackets are as follows:
Another feature of the progressive tax system is that you pay the amount of taxes up to the bracket that you are in. In other words, assuming you have an income of $50,000 – putting you in the 22% tax bracket – you do not simply pay 22% of the full $50,000 for the year. Rather, you would pay 10% on the first $9,875 of your income. Then, you pay 12% on your income between $9,876 up to $40,125. Finally, you would pay 22% on the remainder of your income.
Moreover, that $50,000 is your taxable income, not your full income. Remember, your taxable income is your income after you subtract applicable tax deductions. Thus, your taxable income should be lower (sometimes much lower) than your total income.
Now, let’s go on to the three strategies.
1. Standard or Itemize?
A big part of planning your taxes is your choice of whether to itemize your tax deductions or take the standard deduction. With the passage of the latest tax law, the standard deduction increased considerably – making the choice to itemize less attractive for most tax filers.
The standard deduction is a flat-dollar decrease of your total income. It makes doing your taxes a lot easier. As you likely know, Congress adjusts the standard deduction for inflation every year. For the 2020 tax year, the standard deduction is $12,400 for single filers and married people filing separately and $24,800 for married people filing jointly.
Itemizing, on the other hand, is taking all of the individual tax deductions that may apply to you, such as mortgage interest, property taxes, medical expenses, or home office expenses. When it comes to itemizing, a Sarasota tax strategy attorney for individuals can help you.
2. Deductions vs. Credits
Another tax strategy is to understand what tax deductions and credits are available to you. As noted, there are tax deductions like those listed above. Then, there are tax credits, like the earned income tax credit, the lifetime learning credit, adoption credit, and the child tax credit. Both are considered “tax breaks” that can reduce your taxable income.
But what is the difference between a deduction and a credit?
1. A deduction is something you subtract from your total income to arrive at your taxable income.
2. A credit, by contrast, is an amount of money that is automatically substracted from the taxes you owe.
3. How to Lower Your Tax Bill
Finally, there are a few things you can do ahead of time to keep the IRS off of your money when you file your tax return. First, manage the number of withholdings on your W-4 form at work. If you don’t like the IRS taking your money, only to give you a big refund at tax time, then reduce the number of withholdings on your W-4. It’s your money, why should you let the IRS hold it (interest-free) for about a year.
Second, put money into an investment vehicle like an IRA before tax time. That immediately reduces your total income for the year.
In sum, there are a lot of great ways to effectively reduce your tax burden, and/or keep more of your money. Think about speaking with a tax professional to get the most out of your income.
Talk to a Sarasota Tax Strategy Attorney For Individuals
No question, doing your taxes can be stressful. Yet, having a Sarasota tax strategy attorney for individuals at your side to advise you on options and strategies for responding to the IRS is invaluable during the audit process.
Consider reaching out to the Law Offices of Mary E. King to help. Tax matters can be complicated, and thus, it is always helpful to have someone in your corner who understands the tax law and deals with the IRS on a regular basis. Indeed, beyond just the stimulus payment from the IRS, there could be other issues with which a seasoned tax attorney can help.
So, when it comes to dealing with tax relief and tax litigation, you need to talk to a Sarasota tax law attorney who can help. Mary E. King has spent her career concentrating in tax law and can help you with tax scams in Florida and elsewhere. Attorney King has a wealth of information about what types of options would make the most sense for you and your business.
That helps explain why she’s received an A+ rating from the Florida Better Business Bureau. If you have a tax-related issue – no matter how small or how large – setting up an initial consultation with Mary E. King, tax lawyer of Florida, is the first step you should take towards relief.
The Law Office of Mary King P.L. offers complete IRS problem-solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses. Call us today to schedule an initial consultation. With years of experience as a tax lawyer in Sarasota for many clients, Attorney Mary E. King can make sure that your tax issues are resolved in your favor. Fill out our online contact form, or call us at 941-906-7585. Remember, at the Law Office of Mary E. King, we are focused on solving your tax issues for good.