Almost half of all Americans pay more in taxes than they ought to.
Are you part of this group? Are you interested in keeping more of your hard-earned money in your bank account, where it belongs, instead of waiting for a tax refund?
If you answered “yes” to either of these questions and want to figure out how to avoid paying taxes that aren’t necessary, keep reading. All the information you need is explained down below.
Contribute to Your Retirement Accounts
If you want to reduce the amount of money you owe in taxes each year, make sure you’re contributing as much as possible to your retirement accounts.
Maximizing your retirement contributions is especially helpful if you’re self-employed.
When you contribute to your 401(k) or IRA (Individual Retirement Account), you’re able to deduct those contributions from your annual tax bill. This, in turn, lowers your annual gross income and saves you from owing the IRS money.
Choose the Right Filing Status
Make sure you’re choosing the right filing status. Remember, tax brackets are more generous for those who choose a Married Filing Jointly status over those who file separately from their spouses.
If you choose to file separately, you’ll end up owing a lot more money than if you filed with your spouse. If you’re on the fence about doing this for some reason, talk to a tax professional to see what they recommend.
Pay as You Go
If you’re self-employed, it’s up to you to pay taxes each quarter on the money you earn throughout the year.
If you don’t do this, you’ll end up with a large tax bill at the end of the year. You’ll also face some potentially hefty fines for underpaying.
To avoid overpaying and these fines, make sure you’re withholding money from your earnings and making quarterly payments on time.
This site helps you calculate your earnings and make sure you’re making large enough payments (without overpaying).
Work With a Tax Professional
If you have an accountant who handles your finances and looks over your taxes, they can make sure you’re not paying more than is necessary.
They can also keep you informed about deductions that you might not have known about otherwise. This can help to further reduce your tax bill and allow you to keep more money in your bank account.
You Know How to Avoid Paying Taxes Unnecessarily: Now What?
As you can see, you don’t have to pay more taxes than are necessary.
If you follow this advice on how to avoid paying taxes that you don’t need to pay, you’ll get to enjoy larger paychecks and have more money in your pocket.
Do you want to learn more about managing your finances, especially when it comes to your taxes? If so, check out the Taxes section of our website today. You’ll find all kinds of useful tips and tricks here.