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Tax Central

Types of Refundable Tax Credits

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Refundable tax credits are a valuable tool for those who may not owe taxes or owe very little taxes, but still want to receive a tax refund. These types of credits can be used to receive a refund even if you don’t owe any taxes. In this blog post, we will take a closer look at two of the most common types of refundable tax credits: the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). The Earned Income Tax Credit (EITC) The Earned Income Tax Credit (EITC) is a refundable tax credit designed to help low-income earners and working families. The credit amount varies depending on your income, filing status, and the number of children you have. To qualify for the EITC, you must have earned income from a job or self-employment and meet certain income requirements. The EITC can be worth up to $6,660 for tax year 2021. The Additional Child Tax Credit (ACTC) The Additional Child Tax Credit (ACTC) is a refundable tax credit that is designed to help families with children. It is based on the Child Tax Credit (CTC), but can be claimed in addition to the CTC if the credit amount is greater than the taxes you owe. The ACTC is worth up to $1,410 per child for tax year 2021. Both the EITC and ACTC are refundable tax credits, meaning that if the credit amount is greater than the taxes you owe, you can receive a refund for the difference. These tax credits can provide much-needed financial assistance for low-income families and those with children. It’s important to note that the tax laws and regulations are subject to change, so it’s always a good idea to consult with a tax professional or refer to the IRS website for the most up-to-date information on the Earned Income Tax Credit and Additional Child Tax Credit. In conclusion, refundable tax credits are a valuable tool for those who may not owe taxes or owe very little taxes, but still want to receive a tax refund. Two of the most common types of refundable tax credits are the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). The EITC is designed to help low-income earners and working families and the ACTC is designed to help families with children. It’s important to understand the different types of refundable tax credits and how they can benefit you, and consult with a tax professional for more information.

For Business, Personal Finance, Tax Central

6 Tax deduction things you ignore

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When it comes to preparing and filing your taxes, it’s easy to overlook certain deductions that could potentially save you money. In this blog post, we’ll take a look at 6 tax deductions that you may be ignoring and how they can benefit you. Home Office Deduction If you use a portion of your home exclusively for business purposes, you may be eligible for the home office deduction. This deduction allows you to deduct a portion of your mortgage interest, property taxes, utilities, and other expenses related to the business use of your home. Health Insurance Premiums If you’re self-employed, you may be able to deduct the cost of your health insurance premiums. This includes the cost of coverage for yourself, your spouse, and your dependents. Medical Expenses If you have high medical expenses, you may be able to deduct a portion of the costs from your taxes. The medical expense deduction is only available if the expenses exceed a certain percentage of your adjusted gross income. Unusual Business Expenses If you’re self-employed, you may be able to deduct expenses that are considered unusual for your business. Examples include the cost of traveling to a trade show, purchasing equipment, or hiring a consultant. Educator Expense Deductions If you’re an educator, you may be able to claim a deduction for certain expenses incurred while teaching. These expenses include books, supplies, equipment, and software that you use in the classroom. The maximum amount you can claim for this deduction is $250 for tax year 2021. Charitable Donations If you make charitable donations, you may be able to claim a tax deduction for the amount donated. To claim the deduction, you’ll need to itemize your deductions on your tax return and have written documentation of your donations. It’s important to note that these deductions are subject to change and may have certain limitations and requirements. Be sure to consult with a tax professional or refer to the IRS website for the most up-to-date information and to understand how these deductions apply to your specific situation. In conclusion, there are many tax deductions that you may be ignoring, such as home office deduction, health insurance premiums, medical expenses, unusual business expenses, educator expense deductions, and charitable donations. Be sure to consult with a tax professional or refer to the IRS website for the most up-to-date information and to understand how these deductions apply to your specific situation. By claiming these deductions, you can reduce your tax liability and keep more money in your pocket.

Tax Central

How does tax help the government?

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Taxes are the primary source of revenue for governments and are used to fund a wide range of public goods and services, such as education, healthcare, infrastructure, and national defense. But taxes serve more than just a financial purpose, they also play a critical role in shaping a country’s economy and society. Funding public goods and services The primary function of taxes is to raise revenue for governments to fund public goods and services. These include essential services such as education, healthcare, and infrastructure, as well as programs that support the most vulnerable members of society. For example, taxes may be used to fund public schools, hospitals, and highways, as well as programs such as food assistance and housing subsidies. Redistributing wealth Taxes can also be used to redistribute wealth and reduce income inequality. Progressive tax systems, where those with higher incomes pay a higher percentage of taxes, can help to redistribute wealth from the wealthy to the less well-off. This can help to create a more equal society and reduce poverty. Stimulating economic growth Taxes can also be used to stimulate economic growth by providing incentives for businesses and individuals to invest and create jobs. For example, governments may offer tax breaks for businesses that invest in new equipment or hire new employees, or they may reduce taxes on certain types of income to encourage investment. Managing inflation Taxes can also be used to manage inflation by controlling the money supply. Governments can increase or decrease taxes to influence the amount of money in circulation and the level of economic activity. When taxes are increased, it can help to reduce inflation by slowing down economic activity, and when taxes are lowered, it can stimulate economic activity and help to create jobs. Regulating markets Taxes can also be used to regulate markets and promote social goals. For example, governments may impose taxes on certain goods or services to discourage their consumption, such as cigarette taxes to reduce smoking, or carbon taxes to reduce greenhouse gas emissions. It’s important to note that taxes should be designed and implemented in a way that is fair and efficient, and that the revenue raised should be used in a transparent and accountable manner. The government should consult with citizens and stakeholders in setting the tax policy and use the revenue raised to fund necessary public goods and services, promote economic growth and development, and improve the overall well-being of citizens.

Record Keeping Tips, Tax Central

4 Tax season preparation steps

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Tax season is upon us and it can be a stressful time for many individuals and businesses. However, by taking the time to properly prepare for tax season, you can make the process a lot smoother and ensure that you don’t miss out on any deductions or credits that could help lower your tax bill. Here are four key steps you can take to prepare for tax season: Gather all tax documents and receipts: It’s important to have all of your tax-related documents and receipts in one place so that you can easily reference them when preparing your tax return. This includes items such as W-2s, 1099s, and any other forms that report your income, as well as receipts for expenses that may be deductible. Make a list of deductible expenses: Once you have all of your tax documents and receipts in one place, take the time to review them and make a list of all expenses that may be deductible. This can include things like charitable donations, medical expenses, and business expenses. Be sure to keep accurate records of these expenses, including the date, amount, and purpose, as you will need to provide this information when filing your tax return. Compare your income to your expenses: Once you have a list of your deductible expenses, compare them to your income to see if you can take advantage of any deductions or credits that will help lower the amount of taxes you owe. Some common deductions and credits include the standard deduction, the child tax credit, and the earned income credit. Keep in mind that some deductions and credits have specific requirements that must be met in order to qualify. Check in with a tax professional: Finally, it’s always a good idea to check in with a tax professional to make sure that everything is filed correctly and that you’re taking advantage of all deductions and credits that you qualify for. A tax professional can also help you navigate any complicated tax laws and regulations, and can answer any questions you may have about the tax filing process. In conclusion, by taking the time to properly prepare for tax season, you can make the process a lot smoother and ensure that you don’t miss out on any deductions or credits that could help lower your tax bill. By gathering all tax documents and receipts, making a list of deductible expenses, comparing your income to your expenses, and checking in with a tax professional, you can be well on your way to a successful tax season.

For Business, Record Keeping Tips, Tax Central

Best practices for small business taxes

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Running a small business can be both exciting and challenging, but one of the most important aspects of it is staying on top of your taxes. Tax laws and regulations can be complex and confusing, so it’s important to have a solid understanding of the best practices for small business taxes. Here are five key steps you can take to ensure that you’re staying compliant and minimizing your tax liability: Hire the right tax professional: One of the most important steps you can take to ensure that your small business taxes are handled correctly is to hire the right tax professional. A good tax professional can help you navigate the complex tax laws and regulations, and can ensure that you’re taking advantage of all deductions and credits that you qualify for. They can also help you plan for your taxes so that you’re not caught off guard at tax time. Keep a separate bank account for your business transactions: It’s important to keep your business finances separate from your personal finances to make it easier to track your income and expenses. By having a separate bank account for your business transactions, you can easily see how much money your business is bringing in and where it’s going. This will also make it easier for your tax professional to prepare your taxes. Collect and save all your receipts: When it comes to small business taxes, it’s important to keep accurate records of all of your income and expenses. This includes saving all of your receipts, invoices, and other documentation related to your business transactions. This will not only make it easier for your tax professional to prepare your taxes, but it will also help you take advantage of all deductions and credits that you qualify for. Correctly classify your business: There are different types of businesses, each with their own set of tax laws and regulations. It’s important to understand the different types of businesses and to classify your business correctly. Your tax professional can help you determine the best classification for your business. Track your expenses and income: One of the most important things you can do to ensure that your small business taxes are handled correctly is to track your expenses and income. By keeping accurate records of your income and expenses, you’ll be able to easily see how much money your business is bringing in and where it’s going. This will also make it easier for your tax professional to prepare your taxes. In conclusion, running a small business can be challenging, but by following the best practices for small business taxes, you can ensure that you’re staying compliant and minimizing your tax liability. By hiring the right tax professional, keeping a separate bank account for your business transactions, collecting and saving all your receipts, correctly classifying your business, and tracking your expenses and income, you’ll be well on your way to a successful tax season.

Personal Finance, Tax Central

5 Ways to protect income from taxes

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Taxes can be a significant expense for many individuals and businesses, and it’s important to find ways to protect your income from taxes. Here are five strategies that you can use to minimize your tax liability and keep more of your money in your pocket: Invest in a tax-deferred account: One of the most effective ways to protect your income from taxes is to invest in a tax-deferred account, such as an IRA or 401k. These types of accounts allow you to defer paying taxes on the money you put into them until you withdraw it in retirement. This can help you save a significant amount of money on taxes in the short-term, while also helping you save for retirement. Buy municipal bonds: Municipal bonds are a type of bond issued by state or local governments. The interest income from these bonds is generally tax-free at the federal level, and may also be tax-free at the state and local level, depending on where you live. Give to charity: Another way to reduce your tax liability is to make charitable donations. Not only will you be making a positive impact on the community, but you may also be able to claim a charitable contribution deduction on your taxes. Claim all available tax credits and deductions: Tax credits and deductions can help you reduce your tax liability by lowering the amount of income you’re taxed on. Be sure to claim all credits and deductions that you qualify for, such as the child tax credit, the earned income credit, and the standard deduction. Max out retirement accounts: As mentioned before, investing in tax-deferred accounts, such as an IRA or 401k, can help you protect your income from taxes. To maximize the benefits of these accounts, try to contribute as much as you can to them each year, up to the contribution limits. This will not only reduce your tax liability, but it will also help you save for retirement. In conclusion, taxes can be a significant expense, but there are ways to protect your income from taxes. By investing in a tax-deferred account, buying municipal bonds, giving to charity, claiming all available tax credits and deductions and maximizing your retirement accounts, you can reduce your tax liability and keep more of your money in your pocket. It’s important to consult with a tax professional to determine which strategies will work best for your particular situation.

For Business, Tax Central

5 small business tax savings strategies

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Running a small business can be challenging, and taxes can be a significant expense. However, there are several strategies that small business owners can use to save money on taxes. Here are five tax savings strategies for small businesses: Keep good records: One of the most important things you can do to save money on taxes is to keep accurate and detailed records of your income and expenses. By keeping good records, you’ll be able to take advantage of all deductions and credits that you qualify for, which can help lower your tax bill. Buy equipment for your business instead of renting it: When it comes to buying equipment for your business, it’s generally more tax-efficient to buy it rather than renting it. When you buy equipment, you can take a depreciation deduction on your taxes, which can help lower your tax bill. Take advantage of tax breaks available to small businesses: There are several tax breaks available to small businesses that can help lower your tax bill. These include things like the Small Business Health Care Tax Credit, the Work Opportunity Tax Credit, and the Employer Credit for Paid Family and Medical Leave. Be sure to take advantage of all tax breaks that you qualify for to save money on taxes. Get a business credit card: Another way to save money on taxes is to get a business credit card. Business credit cards often offer rewards and cash back, which can help you save money on taxes. Additionally, business credit cards can help you separate your personal and business expenses, making it easier to track your income and expenses for tax purposes. Pay yourself with money left over after paying all the bills: One of the best ways to save money on taxes is to pay yourself with money that’s left over after paying all the bills. This will help you avoid overpaying taxes, and it will also help you save money for retirement. In conclusion, running a small business can be challenging, and taxes can be a significant expense. However, by keeping good records, buying equipment for your business instead of renting it, taking advantage of tax breaks available to small businesses, getting a business credit card, and paying yourself with money left over after paying all the bills, small business owners can save money on taxes. It’s important to consult with a tax professional to determine which strategies will work best for your particular situation.

For Business, Personal Finance, Tax Central

9 Tax deductions for self-employed

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Being self-employed comes with a lot of responsibilities, including the responsibility to accurately file your taxes and claim all the deductions you qualify for. Here are nine tax deductions that self-employed individuals should keep in mind: Phone and internet costs: If you use your personal phone or internet for business purposes, you can deduct a portion of these expenses on your taxes. Keep track of your usage and the percentage of time you use these services for business purposes. Health insurance: Self-employed individuals can deduct the cost of their health insurance premiums on their taxes. This includes coverage for yourself, your spouse, and your dependents. Meals: If you entertain clients or customers as part of your business, you can deduct 50% of the cost of these meals. Just be sure to keep accurate records of who you entertained and the purpose of the meeting. Your car: If you use your personal car for business purposes, you can deduct the cost of gas, oil changes, repairs, and other expenses. Keep accurate records of your mileage, including the purpose of each trip, and the date and odometer reading. Subscriptions: If you subscribe to business-related publications or online services, you can deduct the cost of these subscriptions on your taxes. Business mileage: In addition to the cost of your car, you can also deduct the cost of business-related mileage. The current standard mileage rate for 2021 is 56 cents per mile. Rent: If you have a separate office space for your business, you can deduct a portion of your rent on your taxes. The percentage of your home that you use for business purposes should be proportionate to the size of your home. Educational expenses: If you take courses or attend seminars to maintain or improve your business skills, you can deduct the cost of these educational expenses on your taxes. Home office: If you have a dedicated space in your home that you use exclusively for your business, you can claim a home office deduction. This includes the cost of utilities, repairs, and other expenses related to the space. In conclusion, being self-employed comes with a lot of responsibilities, including the responsibility to accurately file your taxes and claim all the deductions you qualify for. By keeping in mind these 9 tax deductions for self-employed, you can reduce your tax bill and keep more of your hard-earned money. Remember that keeping accurate records and consulting with a tax professional is always recommended.

For Business, Personal Finance, Tax Central, Tips for Verticals & Niches

5 secret tax tricks the 1% richest use

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The 1% richest individuals in the world have access to resources and strategies that the average person may not be aware of to minimize their tax liability. Here are five secret tax tricks that the 1% use: Hire a tax professional to ensure you’re following the law: The 1% understand the importance of having a team of experts on their side. They hire tax professionals to make sure that they are following the law and taking advantage of all deductions and credits that they qualify for. Create an LLC for your business: Many wealthy individuals choose to create an LLC (Limited Liability Company) for their business. LLCs provide the personal liability protection of a corporation while allowing the business owners to take advantage of pass-through taxation. This can save them a significant amount of money on taxes. Invest in stocks or bonds that pay dividends: The wealthy often invest in stocks or bonds that pay dividends, which are taxed at a lower rate than regular income. This can help them save a significant amount of money on taxes. Pay off high-interest debt before filing taxes: The wealthy often make a point to pay off high-interest debt before filing their taxes. This is because the interest paid on high-interest debt can be tax-deductible, which can help them save money on taxes. Donate money to charity: The wealthy often choose to donate money to charity. Not only does this give them a sense of fulfillment and contribute to causes they care about, but it also allows them to claim charitable contribution deductions on their taxes. It is worth noting that these strategies are legal and are used by many individuals and businesses, not just the 1% richest. However, it’s important to keep in mind that tax laws and regulations can be complex and ever-changing, and it’s always a good idea to consult with a tax professional before making any decisions about your taxes. In conclusion, the 1% richest individuals in the world have access to resources and strategies that the average person may not be aware of to minimize their tax liability. By hiring a tax professional, creating an LLC for your business, investing in stocks or bonds that pay dividends, paying off high-interest debt before filing taxes and donating money to charity, you can take steps to reduce your tax bill and keep more of your hard-earned money.

For Business, Tax Central

Tax preparer responsibility

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Tax preparers play an important role in the tax filing process, and as such, they have a number of responsibilities that they must fulfill. Here are some of the key responsibilities of tax preparers: Helping taxpayers file their tax returns: Tax preparers are responsible for helping taxpayers understand and complete their tax returns. This includes providing guidance on which deductions and credits to claim, and ensuring that all necessary forms are completed and filed correctly. Ensuring that all available deductions and credits are claimed: Tax preparers are responsible for making sure that their clients claim all deductions and credits that they qualify for. This can include things like the earned income credit, the child tax credit, and deductions for student loan interest, charitable donations, and medical expenses. Accurately calculating taxes owed: One of the most important responsibilities of tax preparers is to ensure that the taxes owed are calculated accurately. This includes ensuring that all income is reported correctly, and that the correct deductions and credits are applied. Filing the return on time: Tax preparers are responsible for ensuring that the tax return is filed on time. This includes ensuring that all necessary forms are completed and filed before the deadline, and providing their clients with proof of filing. Keeping records: Tax preparers must keep records of the tax returns they prepare and the work they perform. This includes copies of the returns and any documents used to prepare the return. Ethics: Tax preparers must follow professional ethics standards set by the governing body of their profession, such as the IRS or a specific state board. This includes acting with integrity, objectivity, confidentiality, and professional competence. Compliance: Tax preparers must have a good knowledge of the tax laws and regulations and must ensure that the return they prepare complies with these laws and regulations. This includes understanding and applying the most recent tax laws and regulations, and keeping up-to-date with any changes to the tax code. In conclusion, tax preparers play an important role in the tax filing process, and as such, they have a number of responsibilities that they must fulfill. These include helping taxpayers file their tax returns, ensuring that all available deductions and credits are claimed, accurately calculating taxes owed, filing the return on time, keeping records, following professional ethics standards, and ensuring compliance with tax laws and regulations. By fulfilling these responsibilities, tax preparers can help their clients reduce their tax liability and ensure that their tax returns are filed correctly and on time. It’s important for taxpayers to choose a reputable and qualified tax preparer to ensure that their taxes are handled properly and that they receive the best possible outcome. Remember that as a taxpayer, you are ultimately responsible for the information that is on your tax return, even if it was prepared by a professional.