Question

Explain how one will determine the tax savings that are currently available to them, how you can increase those savings, whether they should increase/decrease the amount of withholding, and what records they should keep?

Answer 1

The one whho wants to save the taxes and wants to know whether they should save the taxes should alwas be aware of the new tax policies and new tax saving schemes being introduced in the market.

A person having to pay tax should consult a professional for knowing what all options are available with them for saving the taxes. The person at the starting of the year is known of the fact that how much he/she has to pay in taxes for the earnings to be made in the coming year. He should be either ready to pay the taxes or play smart and start investing wisely to earn some extra income and also save the taxes. All options currently available for tax savings can easily be found on the internet or he should consult tax professional.

A person can increase the savings depending upon how wisely he has invested the amount.

The more you invest, the more you save.

When the questions came to Increasing/decreasing the witholding the should do the following

Proper planning will help you keep more of your paycheck and pay less to the Internal Revenue Service (IRS) each year.

You control how much is withheld from your paycheck. When you started your job, you completed a W-4 form, which tells your employer how much to withhold for the IRS on your behalf. To ensure you withhold just the right amount, use the IRS’ Withholding Calculator. Also, take a look at the size of your tax refund each spring.

Too much: If you get a refund, you had too much withheld from your paycheck. It would be better to have a little extra in your paycheck throughout the year, because otherwise, it’s like you’re giving the government an interest-free loan.

Too little: If you pay too little throughout the year, you’ll be hit with a big bill when you file your taxes, and you could face penalties and interest charges. Use this calculator to see if you’re withholding enough. (You'll need your pay stub, current number of withholding allowances, retirement plan savings percentage, any other payroll deductions, and your state tax rate ready.)

A person should keep all records of following:

(i) Investment made

(ii) Amount invested

(iii) Documents of Investment

(iv) Original signed copy

(v) Bank statement showing amount deducted