Get Your Answers About Tax Planning – FAQs

tax planning

Do I Need To Consider Age Limit On Claiming My Child As A Dependent?

The answer is Yes. As a parent, you will require either a qualified relative test or qualifying child test to claim your child as your dependent. A test will be considered eligible only if your child is younger than you, or under 19 years old, or a student younger than 24 years.

Furthermore, the kids who are disabled do not have this age limit criteria. In simpler words, there’s no age limit if your child is forever and completely disabled. In addition to all this, if you want to meet the qualifies child test to claim that individual as a dependent, consider these three tests:

In addition to meeting the qualifying child or qualifying relative test, you can claim that person as a dependent only if these three tests are completed:

  • Citizen Or Resident Test
  • Dependent Taxpayer Test
  • Joint Return Test

How Can I Enjoy Benefits of Tax Deductions?

For tax planning, you have to be careful about what to ignore and what not to. The tax deductions are amongst the not to be ignored category as it can cost you hard. There are several tax deductions available for businesses and individuals. There are many of them, which you might not know, such as charitable miles, hobby expenses, and tax preparation fees. Furthermore, you can always consider your consultant to review your present status and idea to benefit from tax deductions available for you.

What’s the Difference Between Tax Credits And Tax Deductions?

Tax Deduction: 

  • The tax deductions are crucial to ensure that you’re taking the benefit of all applicable tax credits. It is specifically critical for businesses. 
  • It reduces your taxable income.

Tax Credit:

  • It tax credit reduces your tax.
  • You can be eligible for tax credits depending on your business activities and industry. 
  • The R&D credit is a tax credit that is often ignored. 

How To Determine If I Require An Accountant? 

The idea of having an accountant is correct if your finances are too hectic to handle. Furthermore, they can also help you with building effective tax strategies. You can consider investing in a highly professional accountant if you are itemizing your deductions, work as a freelance, runs your own business, and having complicated investments or stock options. 

Furthermore, there are certain factors that you should never ignore while you hire someone to look over your finances. Make sure whosoever you hire is certified and registered with the IRS. Besides this, you should also ask for their Preparer Tax Identification Number (PTIN).

But in case if you are a full-time employee with easy finances, then there might not be a requirement of having an accountant.

What Is The Difference Between Tax Filing And Tax Planning?

People often come across a situation where they cannot differentiate between tax filing and tax planning. But one should know that it is as dissimilar as tax avoidance is from tax evasion. Many people are there who are not familiar with this distinction. But here are some of the differences:

Tax planning is about to work with a financial expert to ensure that you use the tax code to your most significant benefit.

Tax filing is about the process of organizing and submitting your tax return to the IRS by a decided deadline.

How Can I Productively Use The Tax Saved?

One should have a clear idea about tax planning that it is just not limited to saving taxes. Instead, it is also about to use the money so saved. Besides, reducing your taxes also require to plan how you will effectively utilize the money so saved. 

What’s the difference between an exemption, And deduction?

Exemptions:

The working of exemptions is quite similar to deductions; that is why it is hard for people to differentiate. However, the exemptions help them reduce your taxable income, which lowers your tax bill. For instance, if you have taken a deduction of $1,000 and you have a tax bracket of 20%, you can save $200 on your taxes.

Exemptions can be considered as the one that you get for people in your family, like one for yourself, one for a spouse, kids, and other dependents.

Deductions:

The significant difference between exemption and deductions is that deductions lie in what you get and take them for. Deductions can be taken for many kinds of stuff, such as charitable deductions, student loan interest, tax-preparation fees, and much more to visit – UBOS.

Can A Married Person File Taxes Separately?

Yes, if you want to keep your taxes separate from your spouse’s, then you can do it. It does not matter how you and your partner want to manage your finances. Surely both of you can file taxes separately, but you might miss some of the fantastic benefits that one can access if filing tax jointly.

 

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