Please give me some advice on tax planning. I am right now not much interested in taking up any Life Insurance scheme. What other things should I invest on? Please give a nice quantitative breakup if possible (how much to invest where?). I don’t have any experience on that.

By the way, I am the one an only son (22 yrs age), father is retired but financially very sound. I need not give any money towards family yet. I am not planning to marry in next 5 yrs or so. I have not invested any money in anything yet.

We are having to pay 24% of basic towards PF (employer’s as well as employee’s contribution). As such my gross monthly salary is Rs.16184 (after deducting 12% ) and net salary is Rs.15168 (after deducting another 12% and professional tax etc.

Thanks in advance. I want to do wise monetary planning from now and build good wealth soon.
Following is the breakup of my CTC:-
Gross monthly salary
16184 (after deducting 12% of basic)

Basic Salary 6800
HRA 5100
LTA 600
Medical 1250
Conveyance 800
Other allowance 1634

Deductions
Provident fund 816
Profession tax 200

Net monthly salary
15168

Best answer:

Answer by Jss
With CTC of Rs. 2.01 lacs, your income should not be taxable that you should not owe any tax.

For FY 2009-10, for man the income not subject to tax is Rs. 1.60,000. Professional tax paid by you, your contribution to PF are deductible from your total income.

You have not given the breakup of your CTC. It may include allowance like HRA, transport or conveyance allowance, which are deductible.
Read http://mytaxes.in/index.php?topic=17.0

Give your answer to this question below!

Figuring out how much of your benefits will be included as taxable money involves some math. For planning purposes, you should have an idea of whether your retirement income will cause some of your Social Security benefits to be taxed.
Your pension or annuity may be fully or partially assessable. If all contributions to the pension were deferred, then your money will be fully taxed.

If you contributed some after-assessment dollars to fund your plan, then you have some cost basis in the plan contract. Part of your distributions will be a tax-free recovery of your cost basis, and the remainder will be chargeable income.

Your plan administrator should calculate the taxable portion of your pension allotment. For planning purposes, you will want to contact your plan administrator to find out what your pension payments will be, and what part of the payments will be considered chargeable income.

Distributions from your employer’s 401(k) plan are fully taxable since the contributions excluded from your assessable income. Allotments from Roth 401(k) accounts are treated the same as Roth IRA distributions.

Allotments from your individual retirement account may be fully chargeable, partially taxable, or completely cost-free depending on the type of IRA you have. If you have a deductible Traditional IRA, your distributions will be fully chargeable.

You contributed funds using tax-deductible dollars, and dues are deferred on both the contributions and the earnings until they are withdrawn. If you have any basis in a non-deductible Traditional IRA, your allotments will be partially taxable.

A portion of your distribution represents a return of your non-deductible investment, and that portion is recovered tax-free. Allotments from Roth IRAs are completely free as long as you meet two basic requirements.

Your first Roth IRA contribution was made at least five years prior to any distribution and the funds are distributed after you reach age 59 and a half. Taxpayers must begin withdrawing funds from their 401(k) and Traditional IRA plans once the taxpayer reaches age 70 and a half.

Allotments must start “by April 1 of the year following the year in which you reach age 70 1/2,” which is called the required beginning date. Roth IRAs and designated Roth 401(k) accounts are not subject to the minimum required distribution rules.

The minimum amount that must be distributed is your account balance divided by the life expectancy figures published by the IRS in Publication 590. You can use Web-based calculators to estimate your minimum distribution, such as this RMD calculator from accounting publisher CCH.

Plan to withdraw at least the minimum amount required from your IRA and 401(k) accounts. Retirees have more control over their situation, since they can decide how much they need to withdraw from various retirement plans.

Retirees can keep their taxes as low as possible by using these time-tested strategies. Together, your standard deduction or itemized deductions and your personal exemptions represents how much income will be tax-free.

Retirees can coordinate chargeable distributions with their mortgage payments, real estate taxes, and medical expenses. If your standard deduction will exceed your taxable income, consider withdrawing more retirement funds than you need.

By accelerating income when you have a zero or low rates, you’ll avoid potentially paying more taxes in a future year. Taxpayers can exclude up to 0,000 in capital gains from selling a main home, or up to 0,000 if married.

Also, interest earned from municipal bonds is exempt from tax. There’s a special credit for taxpayers age 65 or older, but qualifying for the credit takes careful planning.

Your adjusted gross salary can fall beneath certain limits. Keeping your assessable distributions to a minimum will push more income to future tax years.

Option 1 seemed to referred to Deferred taxes but the sentence is confused. Option 2 is surely come in tax avoidance but family member’s income must be come in lower tax bracket and its not mentioned here. So Guys Help me out here PLZZZ!!
thanks!

Best answer:

Answer by the tax lady
LOL. Love the typo.

#2 with or without the typo is illegal. The person who made the money is the one who has to pay the taxes on it. After they pay the taxes, they can gift up to $ 13000 to the other family memember–who doesn’t pay tax on it unless it creates further income such as interest.

#1 doesn’t work either–the taxes are STILL owed and now subject to an 8% estimated tax penalty.

So, the answer is sort of “none of the above” though the legal gift from #2 would move the income tax for future income to the recipient.

What do you think? Answer below!

Many people view April 15th as the end of tax season and enjoy the idea that they don’t have to deal with their taxes for another year. I look at April 15th a little differently. I see April 15th as the time to start planning your taxes for the next year (and the next year and the next year).

The best potential to create massive tax savings comes from planning your taxes not only throughout the year, but years in advance.

This doesn’t mean you have to treat your tax planning like a part-time job (although I’ve seen tax savings that yield more than a part-time job!). It simply means take a few hours now to create a tax strategy that is specific to you, then integrate your strategy into your daily routine and take a few hours a month to keep it on track.

I think most people dread tax planning because it’s something they have found to be boring and confusing (and sometimes painful) in the past. Traditional tax planning can be all of this!

This is why I’ve made it my mission to make taxes more understandable. I’ve just recently taken the hundreds of strategies I use with clients and broken them down into 5 secrets that cover the scope of how to create massive tax savings.

5 Secrets to Massive Tax Savings

Secret #1 Rules the IRS Won’t Tell You

Secret #2 Creating Permanent Tax Savings

Secret #3 Forming Your Personal Tax Strategy

Secret #4 Tax Saving Entity Structures

Secret #5 Reducing Your IRS Audit Risk

I’m so excited to share this information!

I’m going to share more about each of these secrets over the next few weeks, but before getting into those details, this week I want to share the common theme behind each of the secrets.

Behind Every Secret is… Knowledge! Now, I’m not referring to the type of knowledge that will have you quoting Internal Revenue Code sections – that falls into the category of boring and confusing. The knowledge I’m referring to is the type of knowledge that makes you aware of what creates massive tax savings so you begin to see your daily routine a little differently.

Here is an example most people can relate to:

Have you ever noticed that right after you buy a new car, you see that same car everywhere and you don’t remember ever seeing that many before? The reality is the cars have always been there, it just takes awareness to see them. Once you become aware of the car, you see it everywhere.

The same is true for tax savings! The opportunities are there, it’s just a matter of being aware of them.

Paying your taxes every year is already a pain, but your debt to the IRS will be made even more outrageous if you do not use federal income tax filing assistance.

Tax Filing Penalty Fees: When the Internal Revenue Service finds out you’ve neglected to file, your debt is hit with IRS tax filing penalty fees. The Failure to File penalty is five percent of your tax debt per month, and caps at twenty-five percent. Odds are that they’ll also hit you with a Failure to Pay penalty, which is one percent of your debt each month with no cap. So the more time that passes, the bigger your tax debt is.

Don’t Forget the Interest! As though you weren’t stressed enough with the accruing penalty fees, you also have to take the interest charges into consideration.

The current interest rate is sitting at 6% of your debt per year. Keep in mind, though, that interest compounds everyday, on top of penalties, so the annual interest rate is actually much greater than that. For example, if you owe k and a year passes, your total tax debt will actually be K. Let 3 years go by, and your debt will be approximately K. This is all thanks to penalties and interest charges.

The Big House: Not to mention, you can serve jail time for neglecting to file. You have to realize, the largest collection agency on earth is the Internal Revenue Service. If they want their money, they’ll be coming after it full strength.You can bet on it. You not filing, whatever the reason may be, says to the Internal Revenue Service that you do not care. That doesn’t accomplish anything but to give them reason to carry out collection efforts to the fullest extent of the law. And so you’ll find yourself doing time.

What Can You Do? The best way to avoid these problems is to file punctually, every April 15, even if you do not have the funds to pay. You can obviously call the Internal Revenue Service and reach a payment agreement. This is a much better approach than letting the interest charges and penalty fees accrue due to your failure to file.

Already Facing Interest and Penalty Fees? A penalty fee abatement may be an option if your debt is already sky high because of interest charges and penalties, and the reason you didn’t file was out of your control (death of a family member, natural disaster, and so on). E-Mail a reliable tax professional, and see how to get your matter handled. Even if you are not eligible for a penalty fee abatement, you may be eligible for another option that might put you in a much better spot than the one you’re already in. It’s fairly simple to pick proper tax filing help. Check that the tax filing help business you’ve picked has at least an A-Rating with the BBB.

Smart Tax Planning with Home Businesses

Most people do not realize just how much money they can save by starting a home-based business. Obviously, the goal is for you to make money with your home-based business, but even if it does not turn a profit right away, you can still benefit from the mere fact that your business exists and that you are attempting to turn a profit.

Also, your home-based business does not have to be a full-time venture. It is something that can fit into your current daily life. You can continue to do what you are doing today, and add a home based business into your focus. Eventually, your goal can be to replace (and greatly exceed!) the income that you generate from your “j.o.b.”

The fact is that most people still struggle with finances, but there are things that you can do legally to ease that burden. If you operate your own home based business, then there are many deductions you will be able to take every year that will dramatically lower the amount you have to pay to the IRS in taxes.

I recommend that you consult an accountant to find out exactly what you are legally able to deduct for your home-based business. But, to give you an idea of the possibilities, the following is a list of deductions that will be available to you if you have your own home based.

Home Office Expenses
Travel Expenses
Entertainment Expenses
Depreciation Expenses
Professional Services Expenses
Advertising Expenses

I am offering you information about a business that you can operate from the comfort of your own home that is truly changing lives, including my own. You can take advantage of this opportunity to start your own home based business and also begin to capitalize on all the tax benefits of being a home-based business owner.

As you have read here today, there are many tax benefits you can receive just by starting a home based business, and you do not even have to turn a profit immediately to take advantage of these benefits. The tax advantages of a home based business are so great, that the idea of starting your own home based business is one you should take into serious consideration.

To find out more about the best home business opportunity available to you, I encourage you to take that first step right away. Fill out the form below, and I will provide you with additional information about the opportunity that is enabling me to live the life of my dreams, and it also lets me keep more of the money I make. I look forward to hearing from you!

Don’t wait until this year’s deadline for tax filing and tax refund has ended. Avoid putting it off because you’re intimidated by doing all that paperwork. It’s important that you file your taxes as soon as possible so you avoid the penalties that can suck your money dry. It’s as important also for you to file tax returns and exemptions to get your money back. We need to be smart and know that filing taxes protects us and our money, so here are several tips to help you get started on getting those tax forms done!

1. Check if you have all the correct documents that you need to fill out. The tax forms should be from your company that you work for, or from your mortgage, and others. These papers include:

For income and taxes withheld, get the W-2 form and a 1040 form from your employer. You will have to fill up a 1099-MISC if you’re doing a freelance job for supplementary income. The 1099-MISC works like a W-2 that clients send in to report their total payments for the previous year.The 1099-DIV form for your brokerage or mutual funds. This reflects the dividends paid and distributions made in the course of the year. You can also get a 1098 because of your mortgage to show the interest you pay annually. And a1099-INT form for your bank account’s interest income.Do check if you still have more forms to receive. Check the IRS website for a guide or call them at 800-829-10402. Save money with IRS.gov, as you can be qualified to file your forms electronically if you’ve earned around ,000 or less. The web forms are neat and concise so you don’t have to be afraid that you’ll get more confused that way. The statistics show that about 70% of tax payers that qualify in 39 states that do allow e-filing don’t take advantage of the free online tax filing.

3. Like so many people, don’t forget to read about what you can actually save and claim from the IRS. Get more money from your returns by claiming your telephone excise tax refund. In February 2007, there are about 35% of those qualified for a telephone excise refund of – that went unclaimed. There are hundreds of informative articles and news stories that feature tax breaks, what are special exclusions, exemptions and deductions, and read about if you can avail of those.

4. Hiring an accountant can be really pricey, so as much as possible do it so by yourself and just review all the information and calculations over and over again. If you’re just confused in general, get help in any way you can. The IRS is also open for your queries, so you can check out their website for their FAQ’s and general information or call them at the number above. If you’re software-savvy you can also use those tax preparation programs to get faster results and have a lower margin for calculation errors.

5. Avoid all kinds of penalties! That’s why it’s a must for you to file your taxes and meet the deadline because of the penalties. The 5% monthly penalty for not passing your tax forms will absolutely drain your money. Imagine having to pay an additional 5% of the total tax that you owe! All that money that’s supposed to be yours would be in the hands of the government because you were careless with the deadline! Did you know that the maximum penalty can be 25% of the taxes you owe? Ouch.

With these tips above, do your best to meet the deadline of April 15th of every year. Tax payers will always have plenty of options to avoid penalties if they manage to do what’s right.

Corporate tax planning and management has always been a complicated task for most of us. Moreover, in the present scenario, where most of the businesses are competing with economic insecurity and ever-growing regulatory oversight, the entire job of filing tax returns has become all the more excruciating. Hence, in order to carry out your tax management smoothly, smartly and legally, you need to ensure efficient assistance of a proper, well recognized financial firm that takes the responsibility of handling all your investments and paperwork in an efficient manner. In addition to these basic requirements, you also need to consider and understand the significance of other related issues also such as self-employment tax, company expenses and deductions, business assets, charitable contributions, shifting income, and retirement planning.

On taking help and guidance from such finance consultancies and firms, you get to procure a competent corporate tax strategy that is legally and accurately designed to meet all your business tax payment needs. A properly designed corporate tax planning scheme involves various significant ways and measures of reducing one’s total tax liability. These ways are needed to be designed and implemented very carefully and smartly and in complete accordance with the tax laws. These measures largely include factors like sponsoring a retirement plan, writing off company assets, asserting depreciation expense, squeezing business automobiles expenses and office expenses, buying self employment health insurance, employer sponsored child care resources, and having a for the company.

However, before seeking help of any such consultancy, ensure to conduct good market research, so that you can totally avoid the chances of getting associated with some fraud and inexperienced tax consultancy. Always remember that corporate tax planning is one challenging job that demands proper understanding of corporate tax laws, complete information of new and added amendments, and legal ways of minimizing the tax liability and up-to-date software to eliminate the unnecessary requirement of huge paperwork. And most importantly, when you take a finance firm’s help in crafting a corporate tax planning scheme, you tend share all your company’s income details, hence, a very reliable source should be contacted so that proper security is assured. These consultants can also offer you qualitative information regarding the appropriate use of government tax relief’s, concerning research and development information technology and environmental investment.

I need approximate time for filing tax returns and until we get our tax returns back.

Best answer:

Answer by Caldera Smith
It depends on a couple of things. E-filed returns take about 3 weeks to process. Mailed returns take about 6-8 weeks. If you file injured spouse or are applying for an ITIN it can take much longer.

What do you think? Answer below!

You can’t deduct your auto insurance premiums if you use your car only for personal purposes

If you use your motor vehicle only for personal purposes (like most people), you can’t deduct your auto insurance premiums on your tax return.

If you use your car for business purposes, you may be able to deduct some car-related expenses, including insurance premiums

Whether you’re self-employed or an employee, you may be able to deduct certain car-related expenses if you use your car for business purposes.

However, if you use your car on business and your employer fully reimburses you for your expenses, you can’t deduct those expenses. If you use your car for both personal and business reasons, you can deduct only that portion of your car expenses that can be traced to business use. (For individual taxpayers, commuting to work normally doesn’t qualify as business use.)

At tax time, you take your deduction as a miscellaneous itemized deduction. Miscellaneous itemized deductions are deductible only to the extent that they total more than 2 percent of your adjusted gross income (AGI). So, if 2 percent of your AGI equals ,000 and your total miscellaneous itemized deductions (including business-related auto expenses) only come to ,900, you won’t be able to deduct your auto expenses on your tax return.

There are two methods for calculating auto expense deductions–the standard mileage allowance and the actual expenses method:

Standard mileage allowance: If you own or lease a car and are not reimbursed for the business use of your vehicle, you may be able to calculate your deduction using the standard mileage rate (50 cents per business mile for 2010, down from 55 cents per business mile for 2009). Several requirements apply, however. You can also deduct the cost of business-related tolls and parking (but not commuting-related tolls and parking).
Actual expenses method: You may be able to deduct the actual cost of using your vehicle for business. Your business expenses can include depreciation, tolls, parking fees, insurance premiums, repairs, gas and oil, rental fees, lease fees, excise taxes, and garage rental fees (to the extent that the costs were related to business and not your personal use).

No matter which method you use, the IRS requires that you keep careful records of your business travel, including the dates you used your car, the number of miles driven, and the reason for the travel on business-related tasks.

If your car is stolen or damaged, you may be able to claim a theft or casualty loss deduction

If your car is stolen, damaged, or destroyed in an accident or by an act of nature (e.g., fallen tree, flood), you may be able to claim a theft or casualty loss tax deduction if your auto insurance coverage does not completely reimburse you for your loss. (A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.)

For individual taxpayers, the casualty and theft deduction is an itemized deduction that is subject to two limitations. First of all, you can’t deduct the first 0 of any loss. So, if your used radio is stolen from your car, you’re out of luck (at least in terms of a deduction). Second, even if your loss exceeds 0, you can only deduct casualty and theft losses if the total amount you lost in the year (after the 0 per casualty threshold) exceeds 10 percent of your AGI.

You must file federal Form 1040 and itemize your deductions on Schedule A to claim a casualty or theft loss deduction. Use Form 4684 to figure the amount of your deduction, and consult a tax professional if you need help.

If you’re reimbursed for your loss, you must subtract the reimbursement when calculating your loss. In other words, you do not have a casualty or theft loss to the extent you are reimbursed. If your property is covered by insurance, you should file a timely insurance claim for reimbursement of your loss. Otherwise, you may not be able to deduct your loss. Generally, you must also file a police report for any theft losses.

What about auto insurance deductibles?

Auto insurance protection does not begin until the deductible has been satisfied. So, if you have an auto insurance policy with a 0 collision deductible and you get into an accident, you’d have to cover the first 0 of your loss out of pocket. At tax time, though, this deductible may be written off on your tax return (subject to the 0 and 10 percent rules) as a casualty loss if you meet all necessary requirements. However, you can’t deduct a casualty loss involving a car accident if your willful negligence or willful act caused the accident.