When most people file their taxes, they pay a portion of their income to the government. When filing a tax return, those who are seeking for a strategy to lawfully reduce or eliminate their tax liability should take advantage of specific tax benefits.
Tax Deductions
A tax deduction reduces your taxable income, lowering your tax payment. You reduce your taxable income by deducting the amount of the tax deduction from your earnings. Your tax burden will be smaller if you have a lower taxable income. There are two types of tax deductions: the standard deduction and itemized deductions.
The standard deduction is a dollar-for-dollar reduction in your adjusted gross income with no questions asked (AGI). The amount you are eligible for is determined by your filing status.
Itemized deductions allow you to reduce your taxable income by claiming any of the hundreds of tax deductions available to you. You’ll pay less in taxes if you can deduct as much as possible.
Investments
Holding onto your stock investments in the long term may render more benefits beyond dividends. Investors who keep their stocks for longer than a year or more can potentially avoid higher taxes and get long-term capital gains as opposed to short-term capital gains.
Qualified Dividends
A qualified dividend may give taxpayers matching rates with rates from someone who is eligible for long-term capital gains. The stipulation for qualified dividends are that the qualified stocks must be held for at least 60 days during the 121-day period beginning 60 days before the ex-dividend date and must be identified by the IRS as a qualified dividend.
Credits
Taxpayers who know they’ll owe money should check into tax credits to see whether they qualify. Individuals who qualify for the Earned Income Tax Credit may be eligible for a tax refund after submitting their return. You may be entitled to a tax credit if you contribute to a qualified retirement savings account, which may possibly wipe out your whole tax payment.
A Fresh Start
Though the aforementioned tips are very vital to taxpayers, there are still many who are still have tax liabilities and need a fresh, new start. The IRS Fresh Start Program is an effective way to take control of your tax situation. This program offers a variety of solutions for taxpayers who are struggling with unpaid taxes, and ensures that you will not be penalized or face additional penalties if you qualify for the program. So what are you waiting for? The time to begin this process is now!
How Simple Is Qualifying?
Considering that the Fresh Start Program is a federal program, you would think meeting the qualifications may be very difficult, but really, it’s a lot simpler and quicker than you think. Take the following steps in order to find out if you are eligible in as little as 3 minutes.
- Fill out some basic information about yourself and your back taxes here.
- Have a representative reach out to you to discuss your eligibility.
- Go through the enrollment process and finally reduce or eliminate your tax liabilities.
