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Personal Tax Services to Minimize Your Tax Burden

As the leaders of financial planning and management, we ensure minimum tax burden on our clients through our personal tax services.In addition, we comprise a team of highly qualified and proficient CPAs with expertise in offering our clients tax-saving opportunities.

Since personal income tax constitutes a significant portion of an individual’s cost, devising a strategy to minimize it is crucial. Depending on your situation, you require a customized tax strategy that fits your needs. Our experienced team is available to offer solutions that assure a higher level of retained wealth.

Therefore, manage your wealth through an effective personal tax planning strategy and solid financial decisions.

A person receiving personal tax services to minimize their tax burden

Understanding Personal Tax: A Complete Guide

The personal tax definition refers to a fixed amount of money that individuals pay back to the government on salaries, wages, dividends, rent, interest, profits, etc. To avoid late tax filing penalties, an individual must file the taxes to the concerned authority before the deadlines every year.

Taxes levied on individuals and businesses in the US are based on a progressive tax system where a higher tax rate is applied to those with higher income or wealth. These taxes can range from 10% to 37%, depending on the total income of an individual.

Fortunately, being a taxpayer, you can save on your taxes by claiming deductions, exemptions, and personal tax credits. Thus the foremost way to save taxes is to work on your financial planning and create a strategic approach toward preplanning investments.

How Does Personal Income Tax Work?

The federal, state, and local governments levy personal taxes on the citizens of the United States. Taxes on individuals’ or businesses’ income and payroll are the primary types of personal taxes collected in the US.

The federal income tax system is progressive in nature, which simply means that those earning more will pay a higher percentage of their income in taxes. Federal personal tax rates range from 10% to 37%, depending on the income of individuals and businesses. Individuals must file taxes annually and report their income along with applicable deductions and credits to reduce their tax liability.

In addition, employers collect payroll taxes from employees and use them to fund Social Security and Medicare programs, matching the amount their employees pay.

Additionally, individuals may be subject to state and local taxes, such as income, sales, property, and other taxes and fees. In addition, every state and local government sets its personal and business tax rates and rules.

A diagram explaining how personal income tax works

For personal tax filing in the US, people must consider the following points:

  1. Complete and submit forms and receipts showing the money earned and tax-deductible expenses.
  2. Select your filing status- married, household contributions, etc.
  3. Choose the way of filing taxes- tax preparation software, etc.
  4. Assess and determine your personal tax deductions.
  5. Pay your taxes if you owe money.
  6. Know the last date and submit your tax return by then.

Personal Tax Exemptions: What You Need to Know

Personal tax exemptions reduce an individual’s taxable income depending on the number of dependents. However, as of 2018, personal exemptions were removed as part of the Tax Cuts and Jobs Act.

Under the previous tax law, taxpayers could claim a personal exemption for themselves, their spouse, and each qualifying dependent. Between 2018 and 2025, the Tax Cuts and Jobs Act eliminated personal exemptions and enhanced the standard deduction and child tax credit.

In addition to the standard deduction and child tax credit, taxpayers are also eligible for other deductions and credits, such as the earned income tax credit, education credits, and deductions for charitable contributions and state and local taxes. Consulting a tax professional and obtaining personal tax services can assist you in making the right decisions.

Maximizing Your Personal Tax Deductions: A Guide

Taxpayers can use personal tax deductions to reduce the amount of income before calculating tax owed. Specific eligibility criteria must be met before taxpayers claim deductions. As per the personal tax services, deductions available for individuals include the following:

Work-Related Deductions

Under this aspect, business expenses, use of a car for business purposes, using the home for firm work, etc., can be claimed as a deduction.

A person reviewing their personal expenses to maximize tax deductions

Itemized Deductions

Standard deductions, sales tax, real estate tax, property tax, etc., are involved in this section.

Education Deductions

Interest on student loans, work-related educational expenses, and teacher educational expenses are a part of these deductions.

Healthcare Deductions

Health Savings Accounts (HSA) and medical and dental expenses constitute personal tax deductions.

Investment-Related Deductions

Sale of home, capital losses, bad debts, etc., are a few deductions.

Personal Tax Credits: How to Claim and Maximize Your Benefits

Personal tax credits in the United States are incentives the government provides to help reduce an individual’s tax liability. Unlike personal and business tax deductions, which reduce taxable income, tax credits directly reduce the amount of tax owed or enhance tax refund.

Some credits allow refunds even if you don’t owe taxes. The different types of tax credits include:

  • Family and dependent credits (child tax credit,education, adoption, and other credits)
  • Clean Vehicle and Energy Credit
  • Income and Savings Credit
  • Homeowner Credits
  • Healthcare Benefits

Here are some steps curated by personal tax services to claim and maximize tax benefits from personal tax credits in the US:

  1. Proper Documentation is Crucial

In order to claim a tax credit, it’s important to have all the necessary documentation ready to verify your eligibility.

  1. Check if you are Eligible

Understanding the requirements to be eligible before claiming a tax credit is crucial.

     3. Don’t Forget to Claim the Credit on your Tax Returns

Remember to claim the credit on your tax returns for the year, and be aware that additional forms or schedules may be required depending on the credit. Utilizing tax software programs can help you identify and claim eligible credits to maximize your benefits.

  1. Maximize Tax Benefits by Planning

Finally, consider planning and utilizing available strategies to further increase your personal tax benefits.

Personal Tax Rates Explained: How Much Will You Owe?

Personal tax rates in the United States follow a progressive tax system. It means the more income you earn, the higher tax bracket you will fall into. Here’s a breakdown of the current tax rates for the 2022 tax year:

For Single Filers:

○ 10% on taxable income from $0 to $10,950

○ 12% on taxable income from $10,951 to $45,700

○ 22% on taxable income from $45,701 to $117,900

○ 24% on taxable income from $117,901 to $190,600

○ 32% on taxable income from $190,601 to $341,250

○ 35% on taxable income from $341,251 to $418,850

○ 37% on taxable income over $418,850

For Married Filing Jointly:

○ 10% on taxable income from $0 to $21,900

○ 12% on taxable income from $21,901 to $91,400

○ 22% on taxable income from $91,401 to $235,800

○ 24% on taxable income from $235,801 to $379,200

○ 32% on taxable income from $379,201 to $682,500

○ 35% on taxable income from $682,501 to $836,900

○ 37% on taxable income over $836,900

It’s crucial to note that these rates only apply to taxable income, which is your gross income minus any deductions or exemptions. Additionally, certain types of income may be subject to different tax rates, such as long-term capital gains and qualified dividends. The tax filing deadline for tax year 2022 is April 18, 2023.

Personal Tax Planning Strategies for the Financial Year

Personal tax planning strategies are critical to reducing tax liabilities and maximizing income value. Since avoiding the tax is unethical, you can plan in a way that lets you save money from the taxation point of view without defying the laws. Various tax-saving investmentsallowances, etc., are available to people. These are mentioned below:

Contribute to Qualified Funds and Accounts

Putting money into qualified funds and accounts like employee benefits and retirement accounts can assist in exempting some income from taxation or deferring them on other earnings.

A person reviewing personal tax planning strategies

Long-term Capital Gains

Investing your money for the long term in stocks, bonds, mutual funds, and real estate can fetch you a lower taxation rate on long-term capital gains. Further, deducting capital losses can also reduce your tax burden.

Invest in Municipal Bonds

Municipal bonds and their interest attract lower to no federal taxes.

Thus, personal tax services allow you to plan strategies to reduce tax liabilities intelligently.

Tax-Saving Investments: Maximizing Your Personal Tax Benefits

Taxpayers should add tax-free personal allowances and investments to their portfolios to minimize the tax amount they owe. Tax-efficient investing is crucial to maximizing your returns and avoiding losing money in taxes and the potential growth generated through the saved money.

Here are some popular tax-saving investments to try per personal tax services:

1. 401(k) Plans

401(k) stands for a retirement savings plan offered by employers, contributions to which are tax-deductible. In addition, earnings on the investments in a 401(k) plan grow and are tax-deferred until you withdraw them.

2. Individual Retirement Accounts (IRAs)

IRAs are another type of retirement savings account that assists in saving taxes. Traditional IRAs fetch tax-deductible contributions, and investment earnings grow tax-deferred until withdrawn.

3. Health Savings Accounts (HSAs)

HSAs are tax-advantaged savings accounts utilized to pay for qualified medical expenses. Contributions to HSAs are eligible for tax deductions, and any withdrawals for qualified medical expenses are also tax-free.

4. Municipal Bonds

Municipal bonds are debt securities issued by the state and local governments. The interest earned on municipal bonds is exempted from federal taxes, sometimes from state and local taxes.

5. Charitable Contributions

Charitable contributions made to qualified charitable organizations stand tax-deductible. In addition, donating appreciated assets, like stocks or real estate, can offer tax benefits.

Easy Steps to File Your Personal Tax Returns Online

If you wish to file your tax returns online with the help of personal tax services to avoid personal tax penalties, you can use the following options:

  1. You can use IRS Free File (if adjusted gross income is less than $73,000) or Fillable Forms.
  2. Opt for a free tax return preparation site.
  3. Use any commercial tax preparation software.
  4. Search for a personalized tax servicefrom professionals.

The step-by-step tax filing process in personal tax services involves the following:

  1. Fill out the forms and receipts that show income and expenses.
  2. Opt for your filing status.
  3. Decide the method of filing your taxes.
  4. Determine if you’ll take a standardized deduction or itemize your return.
  5. Know how to make a tax payment.
  6. Submit the tax return by the deadline.

Don’t Miss the Personal Tax Filing Deadline: Here’s When You Need to File

The tax filing deadline in the United States usually falls on April 15 every year, but the day will get pushed further if any holiday or weekend falls on this day. For instance, the 2023 tax filing day is on April 18, 2023, as mentioned by IRS.

Note that if you cannot file your tax return by the deadline, you should request an extension of time to file. When you apply for a personal or business tax extension, it allows an additional six months for return filing. However, it does not allow time extension to pay any taxes owed. Therefore, you must estimate your tax liability and pay any amount due by the original filing deadline to avoid personal tax penalties and interest.

If you have to get a refund, no penalty will arise for filing after the deadline. However, filing your return as soon as possible is still beneficial to avoid delays in receiving your refund.

A calendar with a deadline reminder for personal tax filing

The Benefits of Filing Your Personal Tax Returns

Timely filing and paying taxes are crucial to ensure taxpayers don’t face troubles and penalties. Numerous options are available to assist taxpayers who cannot pay the entire amount owed. However, they are advised to pay whatever they can before the deadline. It will help them in lowering the amount owed to the authorities.

The benefits accrued from timely filing of tax returns are as follows:

  • You won’t need to pay added interest or penalties.
  • You won’t lose future refunds. Refunds are used first to pay back any owed taxes.
  • Safeguard your credit scores because if IRS files a tax lien against you, you will face challenges in getting loans.

Thus, taxpayers must consider the benefits and significance of timely personal tax services and returns.

A person receiving a financial benefit from filing their personal tax return.

Tax-Free Personal Allowance: How It Works and Who Qualifies

The specific payments received by the civilian employees of the US government for working abroad are tax-free. These include the following:

  1. Foreign Areas Allowances:

Some foreign areas allowances are tax-free, and the employer should not include the following under wages in Form W2:

  • Transportation for medical treatment
  • Education of dependents in special situations
  • Travel, moving, and storage
  • Certain repairs to a leased home
  • Separate maintenance for dependents
  • Temporary quarters
  • Motor vehicle shipment
  1. Cost of Living Allowances:

Your gross income shouldn’t include cost-of-living allowances if you are stationed outside the US or in Alaska.

  1. Travel Allowances

Travel and living allowances are also non-taxable.

Child Tax Credit: How to Claim and Maximize Your Benefits

The Child Tax Credit is a tax advantage that assists families with dependent children reduce their federal income tax liability. American taxpayers with qualifying children under 17 can get $2000 credit. This credit reduces taxpayers’ total taxes owed to the authorities on a dollar-for-dollar basis.

Taxpayers can obtain the credit via personal tax services as follows:

  1. Determine the eligibility under Child Tax Credit.
  2. Ensure to fill out the correct forms and update them if any information changes throughout the year.
  3. Opt-in for advanced payments.
  4. Maximize your benefits by gaining complete information from personal services income tax.

Avoiding Personal Tax Penalties: What You Need to Know 

Taxpayers will have to pay personal tax penalties if they do not file the tax return timely or make mistakes. Although tax penalties are daunting, having critical information about them will help you avoid and minimize them.

A warning sign indicating personal tax penalties

The four common types of personal tax penalties are as follows:

  1. Failing to file tax returns
  2. Failing to pay the amount owed
  3. Failing to pay correctly estimated tax
  4. If the check gets dishonoured

You can avoid these personal tax penalties by keeping the following points in mind:

  1. Ensure to file your return by the due or extended due date.
  2. Pay your tax in full by the deadline.
  3. Adjust tax withholding from your paycheck, estimate your tax bill, and make estimated quarterly tax payments.
  4. Ensure enough funds are in your account.

Late Personal Tax Filing Penalties: How Much You Could Pay

If you miss filing your personal income tax return by the deadline and don’t request an extension, you could face late filing penalties. Here’s a breakdown of the potential liabilities and the amount you could meet as per the personal tax services:

  1. Failure-to-File Penalty

This penalty arises when you don’t file your tax return by the deadline. The penalty is 5% of the unpaid taxes for every or part of a month when your return is late, up to 25% of the due taxes. If your return is above 60 days late, the minimum penalty is smaller than $435 or 100% of the unpaid tax.

  1. Failure-to-Pay Penalty

This penalty emerges when you don’t pay your taxes by the deadline, regardless of whether you filed your return on time. The penalty is 0.5% of the unpaid taxes for each or part of a month your taxes are late, up to 25% of the due taxes.

  1. Interest

Interest accrues on any unpaid taxes from the due date of the return until the taxes are paid in full. The personal services corporation tax rate and interest rate are determined quarterly and set at 3% per year.

Personal Tax Fraud: Consequences and Penalties

Personal tax fraud, or tax evasion, occurs when an individual intentionally fails to report all of their income or claims false deductions or credits on their tax return. Tax fraud is a severe offense with significant consequences and penalties.

  1. Criminal Prosecution

Tax fraud can cause criminal charges carrying penalties like fines, imprisonment, or both. Depending on the severity of the fraud, the offender could get up to five years in jail and a fine of a maximum of $250,000 for each tax evasion count.

  1. Civil Penalties

Tax fraud can also lead to civil penalties, including a maximum fine of 75% of the unpaid tax liability, personal service company tax rate, and interest. Additionally, the IRS can calculate penalties for failing to file a tax return, submitting a fraudulent tax return, and not paying taxes on time.

  1. Loss of Privileges and Damaged Reputation

Individuals convicted of tax fraud can lose their professional licenses, such as those for attorneys, accountants, financial planners, or accounting services license/CPA Licence. They may also be prohibited from holding public office or from doing business with the government. Further, tax fraud can severely damage an individual’s professional and personal image and reputation, leading them to lose privileges.

Taxpayers can avoid tax fraud by making accurate calculations, and filing returns timely with the authorities. Thus, everything about what personal services are for tax purposes stands clarified.