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Some useful tips for tax reduction

Every year, the tax filing season is a scary time for any average American. Something as complex as tax filing should not be taken up alone, as it can lead to errors and mistakes. These errors can cost you both financially and legally. The IRS can audit you in case there are errors by imposing penalties on you. To avoid these hassles, you must take the help of a tax preparation service consisting of qualified and certified accountants, financial advisors, tax consultants, etc. Depending on whether you are filing a return for your business or personal tax return, these tax services will guide you on how much money you own and how much money you can expect in the form of a refund. These tax professionals will also guide you on Sanford, FL tax resolution

Some useful tips for tax reduction:

  • Boost retirement contributions: Boosting your contributions to the retirement account is one of the best and easiest ways to reduce taxable income. This method can be used by all. When you make contributions to the traditional 401(K) and IRA accounts, it is deducted from your taxable income, thereby reducing the amount of federal tax that you have to give. This money increases and is tax-free until you retire. Though this is not exactly a tax deduction, the money over the year grows tax-free and can be withdrawn tax-free when you retire. 
  • Fund a Health Savings account: In case you have a high-deductible medical plan, opening and funding a health savings account is a great way to reduce your taxable income. Funding these accounts offers immediate tax deductions. The contributions to the account grow tax-deferred and also can be withdrawn tax-free for qualified medical expenses. Any leftover balance at year-end can roll over indefinitely.
  • Donate to charity: Donating to charitable organizations is a great way to write off your taxes. As long as you document your deductions, you can deduct the monetary and non-monetary contributions made to charity. 
  • Save for college: You can save money on your tax by setting aside funds for your child’s college in the future. The best way is to contribute to a 529 plan which is a savings account operated by state or educational institutes. 

Handling annual tax returns is a complicated task for a layman. For a successful tax return, it is essential to take the help of tax professionals who are adept with federal and state laws. They also help in saving your taxes and saving you from an audit by the IRS. Therefore, make sure to hire a reputed tax preparation service at the onset of the tax filing season.

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