Steps are available that can help ensure that taxes are not only completed in compliance with the law, but also take advantage of lowering tax obligations.
Providing the Internal Revenue Service (IRS) with accurate and complete tax returns the first time around may be the easiest way to avoid tax issues. However, there are steps that can be taken to help those who are looking to better ensure their taxes not only comply with state and federal law but also take advantage of strategies that can lower tax obligations.
In most cases, navigating through required tax filings is a complex and arduous process. The process is unique for each individual or business, but some general steps that can help reduce tax obligations in 2014 include:
- Retirement. Contributions to traditional individual retirement accounts, or IRAs, can be tax deductible. The amount that is allowed for deduction varies based on the tax law for the applicable year. Total contributions cannot exceed $5,500 for tax years 2014 and 2015. An additional $1,000 is allowed for those over the age of 50, providing those who fall within this group with an opportunity to build up their retirement accounts prior to entering retirement.
- Gifts. For those looking to lower their income bracket, a gift may be the answer. Generally, the IRS taxes gifts or transfers of property from one individual to another. However, there are exceptions. Gifts to a spouse, payment of tuition or medical expenses on another person's behalf and charitable contributions are some examples. Also, gifts to any one individual under a certain amount are also excluded. Similar to contributions to IRAs, the qualifying amount varies each year. In 2014, the IRS does not tax gifts of $14,000 or less to any one individual. This means a parent could give each child a $14,000 gift during 2014 without having to pay federal gift taxes. This could lead to a significant reduction in one's taxable income.
- Receipts. It is important to get written receipts for charitable donations, particularly those over $250. The IRS requires that anyone claiming these deductions have the ability to prove any contributions that were claimed. The IRS also requires that donations are broken down on a Schedule A.
These are just a few of the steps that can be taken to help reduce an individual's tax obligations. Additional steps can be taken for an individual or a business. Those interested in such action are wise to seek the counsel of an experienced tax attorney. An attorney can review your unique tax issues and provide a variety of legal services including tax preparation, management of domestic and foreign compliance issues and international tax matters.
Keywords: tax law