Taxpayers must take several strategic steps when preparing for future tax returns. Most countries will tax citizens and resident aliens a percentage on income earned throughout the tax year. Generally, low-income taxpayers receive large refunds because of excessive deductions and credits. Taxpayers who do not qualify for certain credits might search for tax planning tips to minimize the taxes they owe on their income. Several tax planning tips are available if you want to reduce your taxes owed, such as maximizing withholdings, learning the laws of your country and contacting a tax professional with your questions and concerns.
If you are employed, it is essential that your employer withholds enough taxes to cover your tax debt at the end of the year. Depending on your country of residence, your governmental tax agency might require you to complete a tax form that determines the amount of taxes that your employer is required to withhold. This form usually allows taxpayers to determine a withholding rate and to claim exemptions. Generally, claiming a certain number of exemptions might prevent your employer from withholding enough to cover your tax debt.
It is important to study your country's tax laws before preparing your income tax return in order to minimize your tax bill. Typically, tax laws change annually to reflect a country's cost of living, financial state and employment rate. Taking advantage of any changes before filing your return can reduce your bill significantly. Your country might use a government website to provide taxpayers with announcements on tax changes and tax planning tips.
In some countries, taxpayers who pay excessive amounts of extraordinary expenses might benefit by itemizing deductions. Expenses such as medical and dental bills, real estate taxes, mortgage interest, donations to charity and losses because of casualty or theft can significantly offset your tax if such deductions are offered in your county. Each country has its own rules for maximizing deductions, so it is important to contact your country's governmental tax agency to inquire about methods for deducting expenses or other deduction tax planning tips.
If at any time you feel uncomfortable or become confused about the laws in your country, contact a tax professional. A tax professional, such as an accountant or tax preparer, typically is trained to help taxpayers who have tax questions and concerns. He or she can help you by evaluating your financial situation, estimating your future tax bills and providing you with valuable tax planning tips to maximize your deductions.