We all love to pay less tax, but most of us eventually end up paying more and receiving very little tax refunds. Probably, the main reason behind this is that our entire focus is mainly on how to manage our tax affairs in an efficient manner. We often tend to overlook the gray areas and the loopholes, which eventually prove to be very costly.
Following are the top five ways that will make things much easier on your pocket while you are filing your tax return.
Try to have organized records for tax related issues and keep all the figures are thoroughly updated. Make sure that no deductions have been missed in the record. It will not only reduce your workload at the time of filing the tax return, but you will also be able to answer all the questions efficiently that IRS may ask. Always remember, if you are unable to explain those questions, you may end up paying additional taxes and penalties.
If you want to increase your tax refund, you will also have to be very careful about entertainment expenses. You should keep in mind that you cannot claim deductions against entertainment expenses. Therefore, if you do not want to have a tax liability on assessment, you will have to make sure that your employer is knowledgeable about the laws pertaining to entertainment allowances and that all allowances have been taxed in full. However, you may be allowed a 50% deduction on essential entertainment expenses, including business meals.
If there are some medical expenses that your medical insurance did not cover, you should keep all the rated statements and invoices so that you could claim a deduction for the same on assessment. If you are serious about increasing your tax refund, you should also keep in mind that even your dental insurance and health insurance premiums might also be considered for deductions up to 7.5% of your overall income. If certain items in medical expenses are non-deductible, the best way to deal with the same is to turn the same into a legitimate business expense.
In order to calculate your travel deductions accurately, you must keep detailed mileage report of the distance traveled.
For example, if you are working at two places, the cost of traveling form one office to another is considered as deductible. But, if you are working at a single place, the cost of traveling to your office from home will not be deducted. It will be treated as a personal expense. Deductible travel costs may include car rentals, taxis, airfare, hotels, tolls and tips.
Overall, you no more need to be nervous about the tax season. If you keep in mind the above income tax tips, you will definitely be able to take full advantage of all the tax breaks you are eligible for, which will eventually increase the amount of your tax refund.
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