W-2 Employees have tax options. Although they often feel left out of the tax-loop, those who work for W-2 payroll have a wide variety of options for saving money at tax time. The secret to getting the best tax benefits lies in knowing what your options are and using all the options available to you.
1. Keep all business related receipts. IF you purchase something required for your job and are NOT reimbursed by your employer, that item may well be deductible for you as a ‘job related expense’. As a matter of habit, keep all receipts for job related expenses.
2. Be aware of all deduction options. When you know what deductions you can take at the beginning of the year, you are more likely to save money later in the year on your tax debt. Job related travel, safety deposit boxes, and more are deductible if you choose to itemize.
3. Don’t loose out on tax credits. Tax credits are created to benefit those who have unusual expenses during the year that are not legally deductible. Using the tax credits provides a benefit of returned cash for your expenses when you qualify.
4. Consider Tax Free Investments. When investing money for retirement or education benefits, consider a Tax Free Investment. The lower value of returns may balance out on reduced taxability of the investment.
5. Take a loss. Occasionally, the pay off for selling an investment at an apparent loss, can result in dramatically reducing your tax debt, gaining a benefit of less money spent, and more money gained. Your Tax Consultant can guide you, but will need your Tax information prior to the end of the year.
6. Charitable Donations. More than money, your donations to charity are deductible. If you donate clothing, furniture, or other merchandise to a recognized charity, get a receipt and use the receipt as a deduction on your taxes. Mileage driven for charity is also deductible.
7. Gifts – giving saves you money. If you are retired and your children are due to inherit a large sum of money, gifting them the maximum allowable amount each year is often preferable to maintaining a huge estate and paying estate tax. Consider gifting your children and allowing them to enjoy their inheritance early. (Your tax consultant will have other options for saving your retirement tax moneys also.)
8. Maximize your Retirement Contributions. If you’re in that ‘other category’ too young to retire, too old to have children for deductions, it’s often recommended that you maximize your Retirement Contributions. This contribution can save you money anytime, and provide a viable option for retirement.
9. Put children on the payroll. For legitimate expenses, if you pay your children (over 14) for deductible expenses, pay them a check and pay taxes. Allow them to pay
their own expenses with money they earn.
10. Double-check your Tax Documents. Many errors are made on tax documents that would save you money if caught before taxes are filed. EVEN if you have a competent Tax Consultant/Preparer doing your taxes, double-check numbers, placement of numbers, and items on your tax documents for correctness. Accounting errors can cost you money.
Having a Tax Preparer who willingly offers information about your Taxable Income and Deductions provides far better service than a minimum service whom you pay less, but end up paying more in taxes. Consider the additional amount you are paying in taxes without quality consultation, when considering your Tax Consultant’s Fee.