4 Important Reasons That Understanding Tax Will Help You

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Tax is an important part of life. We all have to pay taxes on our income and our homes. When we shop in high street stores, we also pay tax on the products we buy. Many people accept that they have to pay taxes, but do nothing by way of understanding them. People fear the unknown, and so try to ignore the tax system. Taking control and learning about taxes will help you to better understand your finances. You should make sure that you take the time to develop at least a basic understanding of the tax system. Doing so will change your outlook on tax. You will no longer fear the taxman. Instead, you will understand why you need to pay taxes. Here are four important reasons that you should try and understand tax.

  1. So that you know what you’re entitled to

Believe it or not, the tax system is not there to try and trick you out of money. In fact, the authorities have developed the tax system to work alongside people’s circumstances. If you feel as though you cannot afford tax on your current wage then there are likely to be schemes that can help you. Taking the time to understand the tax system means that you know what you’re entitled to. You might find that there are benefits and tax reimbursements that you can claim back. If you are on a low income, you can often claim money back from the state. Many people are unaware of this fact, and so don’t do anything about their financial situation. Talk to an adviser and see whether you could claim some money back today.

  1. So that you don’t break the law

When you don’t understand the tax system, you fail to understand how it works. That means that you may be breaking the law without even knowing it. If you fail to meet the requirements of the state, you could find that you break the law by not paying your taxes. There are many penalties that you might incur as a result of failing to pay your tax. The state can take you to a claims court and demand that you pay your taxes straight away. They can also issue an IRS tax levy, which means that they have the right to repossess your home without taking you to court. Other penalties include fines and warning letters. You should make sure that you understand the tax system so that you can pay your taxes on time.

  1. So that you can take control of your finances

Understanding tax will help you to take control of your finances. Personal finance is something that many people struggle with on a daily basis. Trying to get your finances in order can be difficult. If you find it hard to take control of your finances, there might be a reason for that. Much of the time when people don’t understand tax, they fail to estimate how much tax they will need to pay. That means that you end up paying more than you bargained for in the first place. Make sure that you understand taxes so that you can factor them in when budgeting.

  1. Because it will help you if you start a business

If you want to start a business, you will need to research taxes in-depth. The moment you start your own business, you become responsible for sorting out your taxes. If you fail to do so, your business could get in a lot of trouble with the law. Take some time to understand the tax system before you think about starting a business. Business tax will plan a vital role in your budget and business plan, and so it is important that you understand taxes before you start.

 

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Inheritance Tax Planning – Reduce the Amount the Taxman Receives

Writing a Will and planning who will inherit all of your money, land and possessions on the event of your death is very important. But when you are doing this it is essential to consider the amount of inheritance tax your loved ones might be saddled with because of how your Will has been written.

When someone dies the government assesses his or her estate (this includes all of the money, land and property) and the person inheriting it is expected to pay 40% tax on anything that exceeds the tax threshold in the UK.

When writing your Will it is very important to also consider inheritance tax planning. There are many things that you can do to reduce the amount the taxman receives; below is a guide to some of the key ways you can achieve this.

Meeting the Threshold

The tax threshold in 2013 in the UK is £325,000, although this changes slightly every year. For example, in 2014 this will move up to £329,000. This means that anything inherited below this amount of money will be completely tax-free.

Taxes

With inheritances its important to try and make sure you get as much as possible.

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However, anything about this will be subject to tax of 40%, which is quite a considerable amount. If your assets will not add up to more than this, then you simply don’t have to worry about your loved ones paying inheritance tax. On the other hand, if your assets will add up to more, then there are a few things you can do to minimise the amount that is taxed.

Gifts to Charity’s or Political Parties

One of the first things you might want to consider is leaving money to a charity or political party. These gifts are completely tax free and if you give away 10% of your overall assets in this way then the rest of your inheritance tax will be reduced to a 36% tax charge instead of 40%.

This is a great way to reduce the inheritance tax bill, and definitely something that you might want to consider when writing your Will.

£250 a Year

Gifts of no more than £250 a year to one individual person are completely inheritance tax free. This means that you could leave a yearly birthday or Christmas present of £250 to each of your loved ones without having to pay a penny of tax.

 

Tax

You want to make sure your inheritance goes as far as possible.

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Not only does this save on tax but it is also very much appreciated by the recipient. A few years of £250 guaranteed every birthday can go a long way in helping people out, as well as being a sweet memory of your love for them.

Consideration of Marriage

Although rarely done in this country, there is an inheritance tax exemption for anyone who leaves money to a person if they will marry someone else. For example, a person may state in their Will ‘I will leave X amount of money if X person marries my daughter’.

There is a tax threshold on this, which is currently a limit of £5000 from parents, £2,500 from grandparents and £1000 from anyone else. If you know your son or daughter plans on marrying a certain person but you just won’t make it to the wedding day, then this could be an important loophole for you to consider.

Conclusion

Planning for your inheritance and minimising tax liability is very important; the death of a loved one is already hard enough without having to wave goodbye to 40% of their assets to the taxman. You may want to write your own inheritance tax plan following these points, and there are many other ways to reduce the amount of inheritance tax your loved ones pay. The best way to fully understand the options is by seeking professional advice and guidance.

Image credits: 401(K) 2013 and 401(K) 2013

Inheritance Tax Planning – Reduce the Amount the Taxman Receives

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Advice for dealing with financial issues relating to tax payment

Tax payment

Tax payment

Finance deals with the condition in which people allot their assets under different conditions of uncertainty as well certainty. A major policy in finance that affects decision is time value for money. This means one unit of any currency today is more valuable than same currency unit tomorrow. Categorizing finance results in three parts that is namely, corporate finance, personal finance and public finance. Each one has its own requirement and deals with different sectors of society.

More about personal finance

No one is ever aware of what is ahead of him. To protect themselves from unforeseen events, people go for personal financing. This decision may include things like payment for education, financing the durable goods like real estate, buying insurance, cars, etc. For example, property insurance, health insurance, saving and investing for retirement.

Personal financial decision involves loan payment, debt obligations, etc. The main areas in financial personal planning are mentioned below:

  • Financial position- This deals with personal resources that are available by examining household cash and net worth cash flows
  • Analyzing the ways of protecting household from uncertain risks. These risks could be categorised into property, liability, death, health and disability
  • Income tax is known as the largest expense in any household. Tax planning is necessary. The incentives given by the government as tax deductions, credits, etc. can be easily used for reducing lifetime burden of tax otherwise there is always tax help available from different agencies
  • Retirement planning is a part of the process which enables you to plan for distributing assets meeting income shortfall if any
  • Estate planning includes planning for disposition of somebody’s asset after death

Need of corporate finance

Corporate finance means providing funds for corporation activities. This involves balancing profitability along with balancing risks. The three decisions are:

  • Investment decision
  • Financing decision
  • Dividend decision

Other business decision related to finance is fund management or investment. Here one has to take the decision of how much, what to invest and when.

More details on financial services

Finance is something that is used as personal finance, by government, by businesses as corporate finance and also by other organisations that include schools, NGO’s, etc. The main goals of the above mentioned activities are achieved with the use of proper methodologies and financial instruments. Finance is the important aspect of business that includes decisions concerned with the use of funds for any firm or enterprise.

A look at the public finance

Public finance refers to that part of finance which is related to sub national and sovereign entities and other public entities such as school districts. It basically deals with:

  • Indentifying the required expenditure for public sector
  • The budget process
  • Debt issuance for public projects

Central banks like Federal Reserve in United States and Bank of England are known as strong players of public finance. They act as lenders and have strong influence on credit and monetary conditions of the economy.

Role of tax in finance

Tax refers to financial charge imposed on a taxpayer by any state and the failure in pay is strictly abided by the rules which say punishment by law. Taxes include either direct or sometimes indirect tax that is paid in the form of money or labour equivalent.

In today’s taxation system, tax levy in money. Tax collection takes place by government agency like IRS in United States or HMRC in United Kingdom. When taxes fail to be paid then civil penalties like fines, incarceration are imposed on non paying individual or entity.

Few categories of tax include:

  • Income tax
  • Corporate tax
  • Property tax
  • Transfer tax
  • Sales tax
  • Excise
  • Service tax and negative income tax

Tax advantage for debt

In corporate finance, tax advantages of debt means it is quite cheaper to finance with debt in comparison to equity. Firms or enterprises are taxed on profits and the individuals are taxed based on their private income. Investors are now paying taxes on interest income.

Author Bio

Jenifer Merchant provides tax help to thousands of people now. With her experience in this field she is able to handle people for helping them out in tax issues and other tax planning in a very efficient manner.

Advice for dealing with financial issues relating to tax payment

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3 Best Places In The US To Incorporate Companies

Best Places In The US To Incorporate Companies

Best Places In The US To Incorporate Companies

Incorporating a company is a big decision with many different considerations. One consideration that all businesses have to think about is the decision of where to incorporate the company. In the United States, different states have different rules for incorporated companies. The choice of which state to use as your company’s incorporation state can have a large impact on the overall success of your company.

Currently, there are many great places to incorporate your company, and each state offers their own benefits and drawbacks. Different states can provide better incorporation benefits for taxes, investments, quality of workforce, cheapest place to conduct business, and many other factors. However, there are three states that offer the ultimate blend of tax breaks, employee incentives, and other benefits that make choosing where to incorporate a much easier decision.

Delaware

Perhaps the most popular place to incorporate a company is Delaware. Delaware provides support for a variety of considerations. Overall, Delaware has one of the lowest tax rates and least amount of governing rules for new companies. This is beneficial to both smaller companies and larger companies. Delaware is also a company that caters to a variety of businesses, including franchises, credit card companies, and other financial institutions. If your company operates in one of these sectors, then Delaware could be the right choice for you.

Nevada

Nevada also has many benefits for both larger and smaller companies. Just like Delaware, Nevada caters to businesses and has fewer rules than many other states. Nevada has no corporate tax at all, which can save companies a huge amount of money each year. Nevada also has one of the strongest economies of any other state in the entire United States, which means that businesses have a higher chance of making it in Nevada.

Wyoming

Wyoming is a surprising addition to the list, but it can provide many benefits over incorporating in other states. Wyoming charges no corporate taxes just like Nevada. While Wyoming does not offer rules and tax breaks specifically for any business sector, they do offer one of the most cost-effective places of business in the entire United States. The cost of maintaining a business in Wyoming is much less than the cost of operations in many other states, and the cost of labor is much lower as well. If you have a large staff and a variety of overhead expenses, then operating out of Wyoming can be a good move for your company’s overall success.

If you choose not to incorporate in the state in which you live, you can still incorporate your company in a variety of other locations. Many companies choose to incorporate their companies in a state other than where their business is to take advantage of the tax incentives and other benefits that these states provide. Of course, financial benefit is not the only consideration in choosing where to incorporate. Wyoming, Nevada, and Delaware are all excellent choices of areas to incorporate a business no matter how large or small. Just a little forethought about the pros and cons of incorporating in each state may make the difference between a successful business and a business that fails quickly.

Aaron Borecky is a commentator on financial affairs across a number of web-based forums. His articles tend to engage cpa tax preparation professionals with the industry updates and tax systems.

3 Best Places In The US To Incorporate Companies

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NHS debt. Time to Change the Whole Mentality?

 

NHS debt. Time to Change the Whole Mentality?

NHS debt. Time to Change the Whole Mentality?

The NHS is one of the most popular love-to-hate UK institutions.

As a general rule, most people do realise how lucky they are to be part of a nation that grants free healthcare, but that certainly does not mean that people cannot comment on what they see as problems within that infrastructure.

What’s Happening Now?

Almost everyone has a view or opinion on the way the NHS is run and now that the NHS shake-up is over, these opinions are being expressed more readily in the news. More pervasive than the shake-up, though, is the news of the debt that the NHS as a whole is in at present and this news has lead to some fascinating insights from professionals and the general public.

Most people have some story about attending several appointments they see as unnecessary or being sent to the wrong ward or department. While, on the surface, these stories attest to the idea that the NHS is wasteful, they do not take into account that, on the whole, whatever experience they have had might save money.

That is, at least save more money than the previous incarnation of the process. The NHS is ever-evolving and a string of money saving experts and consultants have been called in over recent years to change the services people are provided. The truth is that, though money is being saved, it is clearly not enough and the huge debt the NHS faces is growing regardless of the plans that have been put in place.

The Future

According to a number of media sources, there are plenty of NHS hospitals and health boards currently facing insurmountable debts. This may sound scary but it is possible to change human thinking and see this as a turning point. The NHS is no longer in a position to bring in consultants to provide a stop-gap approach to saving some money here and there. What is required is a completely radical rethink.

Centralisation

One of the best things to come from this is the idea of centralising many services. Ensuring that the right patients appropriately attend the right hospital or place of care at the right time could save the NHS billions and that is only the start of what central services can offer.

At present, more than 10% of patients attending day surgeries are turned away because they are not suitably prepared for the procedure, having not followed the directions given to them. A central system that allows these patients to be contacted and reminded of what is required would save these wasted appointments while simultaneously cutting down waiting lists.

Redeployment

While many services need to be centralised, some should also be better dispersed. Social care is a vital step towards reducing healthcare costs and, with an ageing population, an infrastructure that allows more care in the community is vital. Many hospitals are being used inappropriately to care for conditions that could be managed in the community at a fraction of the cost.

This being said, centralisation and redeployment are only the tip of the iceberg in terms of what can be done to help the NHS through this crisis. There are a number of steps that can be taken to aid the ailing service but what must be realised first is that this crisis is merely a stepping stone and should be used as a catalyst to provide a better service in the future.

This guest post has been written by IVA Experts who keep a close eye on all the financial news and issues throughout the world.

 

NHS debt. Time to Change the Whole Mentality?

 

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Tax Planning – Three areas of planning that can save bucks!

Planning tax can save bucks

Planning tax can save bucks

In economies around the globe, national debt is getting out of control. In order to lead the nation towards a debt-free life and set its track towards prosperity and welfare, government revises tax brackets almost every year. High tax brackets if, on one hand, are facilitating government to accumulate revenue then on the other hand, are also posing a burden on every individual, retail and wholesale business to spend more money every year.

What is Tax Planning?

Tax planning is helping individuals to become smart and save money by reducing their taxable income. It takes into account all the tools and techniques one can use to reduce their taxable income and pay less taxes. Tax planning applies the true knowledge of available tax credits and tax exemptions and leads the individual to make the most of them.

Tax Planning is an ongoing process which requires individuals to plan their financial position all the year through. It allows them to identify their needs, plan each and every activity of their daily life and claim tax benefits based on them. There are targeted areas of tax planning that should be planned to control your financial affairs so that you may save bucks.

Areas of Planning

This is for sure that we all want to save money on our tax liability but we don’t know what can help us to achieve our goal. According to an estimation, less than 5% of salaried individuals know how they can optimize their tax liability. If you want to be in smart group of people, learn the three areas of tax planning that can bring drastic economy in your tax liability.

Reporting Less income

The income tax rate is directly proportional to the income of an individual. The more is your income the higher would be your income tax bracket. In order to reduce your income and lower tax liability, you can earn less income and make additional money through dividends, capital gains and interest income. You can also make adjustments (dedications) to your income by making contributions to traditional Individual Retirement Account and heath saving accounts, showing classroom related expenses, student loan interest paid, alimony paid and many other such adjustments.

Adding Tax Deductions

In order to reach at taxable income, there are several deductions allowed by the law to determine tax liability. These deductions include investment expenses, tax preparation fees, gifts given to someone, charity, mortgage interests, property taxes, health insurance premiums, meals provided at the work place, retirement planning services, inheritances, cash rebates won from manufacturers or suppliers and group term life insurance premiums. If you know the types of deductions, try to spend the major portion of your income on these tax-deductible activities.

Increasing Tax Credits

There are also many tax credits which help to reduce your income tax liability. Tax credits include child tax, dependent care tax, adoption tax, and electric car, credit for elderly people and disabled people, retirement saving contribution, home energy tax, student income and foreign tax credit. If you want to take lifetime college classes or have or adopt a baby some time in future, you might want to consider doing it a bit sooner since it will help reduce your tax. Moreover, taking an earned income tax credit is also a wise idea which often results in a tax refund.

Note: Be careful while submitting your tax returns and never forget to study the current tax implications of the country you reside in, since tax liability varies from country to country.

Julie Robert is a B2B wholesale trade and B2B marketing expert. She writes frequently on the topics related to UK Wholesalers and trade suppliers.Tax Planning – Three areas of planning that can save bucks!

 

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Tax debt relief – What are your options

Tax debt relief – What are your options

 

Tax debt relief – What are your options

Tax debt relief – What are your options

It is seldom that people like to fall behind on their taxes and pile up there tax debt knowingly, but there are times when your financial condition does not permit you to remain current on your taxes. If you allow it to linger on for quite some time, you are bound to be in a financial mess sooner or later. Currently, if you are an individual who is facing such a situation and would like to come out of it, you can try out anyone of the IRS tax debt relief options that can offload the tax debt burden from your shoulders. Let us delve deeper into the tax debt help options that can be of help to you.

Regardless of the tax solution you opt for, you can manage your income tax debt either on your own or with the help of an experienced tax professional. These are the possible ways of tax debt settlement that are hassle free.

Tax debt relief options – Take your pick

Generally speaking, there are 5 options that are available to a tax payer who has fallen behind on taxes. These are as follows-

  • Offer in Compromise – This comprises an arrangement plan with the IRS or Internal Revenue Services, and you wherein, you will be required to pay much less as compared to what you are supposed to pay. You make the payment as a lump sum. You will follow an installment plan for a short time span.

  • Partial Payment Installment plan – You will have to pay every month for half of the tax amount.

  • Installment Agreement- In this tax solution, you will have to shell out every month part of the entire IRS tax debt you owe.

  • Currently –not- collectible – Let’s say you are facing problem at the moment and it will not be possible for you to make any payments towards taxes of IRS, all you do is communicate your inability to pay the taxes to the IRS for a stipulated time period.

  • Bankruptcy – Decision is provided for IRS related debts, under Chapter 7 Bankruptcy law, entire or part of the IRS debt may or may not be discharged.

 

Tax debt relief – What are your options

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