No one likes paying taxes, but it's a necessary part of being a responsible citizen. However, paying too much in taxes can feel particularly frustrating, especially when you're already struggling to make ends meet.
Whether you're a high-earner or a low-income earner, there are several reasons why you might be paying more than your fair share.
“Many business owners and individuals find tax filing to be confusing and overwhelming,” commented Chase Insogna, CPA and founder of Insogna CPA. “They may have fears of a large tax bill or anxiety about dealing with the IRS. However, proper tax preparation can be an opportunity for them to save money and head off the risk of future issues.”
Tax Laws Are Complex
One of the most common reasons why people pay too much in taxes is simply because they don't understand the tax system. Tax laws can be complex, and it can be difficult to know what deductions and credits you're eligible for. This is especially true if you're self-employed or own a small business. To avoid overpaying, it's essential to educate yourself and seek advice from a licensed CPA.
Another reason why people pay too much in taxes is that they don't take advantage of all the business or individual deductions and credits available to them. For example, if you have a home office, you may be eligible for a deduction on your taxes. Similarly, if you donate to charity or have high medical expenses, you may be able to claim these as deductions on your tax return. Make sure you're keeping track of all your expenses throughout the year so that you can claim as many deductions as possible. Here’s a handy checklist to help you keep things organized.
High Tax Bracket
If you're a high earner, you may also be paying too much in taxes because you're in a high tax bracket. While it's true that high earners typically pay more in taxes, there are still ways to reduce your tax bill. For example, you may be able to contribute more to your retirement accounts, which can reduce your taxable income. Additionally, you may be able to take advantage of tax-advantaged investments, such as municipal bonds or certain types of real estate investments.
Finally, if you feel like you're paying too much in taxes, it's important to speak with a licensed tax professional. We can help you identify areas where you may be overpaying and provide advice on how to reduce your tax bill in the future. Additionally, we can help you navigate any tax issues that arise, such as an audit or a dispute with the IRS.
Now is the time to prepare for next year.
Paying too much in taxes is frustrating, but it's important to understand the reasons why it might be happening and to take steps to address the issue. Educating yourself, taking advantage of deductions and credits, and seeking professional advice can all help you reduce your tax bill and keep more of your hard-earned money in your pocket.
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We’d like to help you keep more money in your pocket. Reach out to us today to help you save on your taxes tomorrow.