5 Tax Tips for the Taxed

When the tax season comes around, it is time for you to start working on your tax affairs if you do not want to anger the taxman, and have as many tax deductions as possible. Each dollar you save is another dollar to pay for a well-deserved holiday or reinvest in your business. This article offers some tips and best actions you can take to make putting your taxes together much easier and to minimize your tax bill.

1. Choosing correct filing status

Your tax filing status is an important factor to determine whether you need to file a return, your correct amount of tax, and your standard deduction. The five filing status options are Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow or Widower with Dependent Child.

If you are single on the last day of the year, then this will be your status for the entire year. In case you have more than one tax filing status, it is recommended that you choose the one that provides you with the lowest tax obligation.

2. Filing a tax return

You have to file a tax return if your income is above a specified level. The amount varies depending on filing status, age and the type of income you receive.

But even if you are not required to file based on this, you should still file a tax return if you are eligible for any of the following credits: Earned Income Tax Credit, Additional Child Tax Credit, or Health Coverage Tax Credit. In addition, tax experts recommend filing a tax return to get money back in case federal income tax was withheld from your pay.

3. Keeping good records

You can avoid severe headaches during tax season by tracking your receipts as well as other important records throughout the year. A good record keeping will allow you to document the deductions you have claimed on your tax return. You will need this documentation when the IRS examines your return.

It is recommended that you keep all documents and records that may affect your tax return like bills and other receipts, credit cards, mileage logs, invoices, proof of payment, records to support credits or deductions you claim on your tax return, and substitute, imaged, or canceled checks.

4. Itemizing deductions

Itemizing deductions on your return depends on your expenses last year. Money spent for medical care, taxes, mortgage interest, casualty losses, charitable contributions, and miscellaneous discounts can significantly reduce your taxes. If the standard deduction is less than the amount spent on these categories, you can benefit by itemizing.

5. Finding the right tax adviser

One important advice that you and successful entrepreneurs should follow is to find a tax adviser you think is right for you. This is PricewaterhouseCoopers partner Paul Brassil's best tax tip.

He said that you should spend more time to find the right one: "Find someone you really like working with, and who has strong technical backup in people and resources. Too often people muddle along with an adviser from the distant past, without recognizing that the needs of a growing business include upgrading the level of advice they receive."