What about any tax breaks you might be overlooking? We have answers to all these questions below.
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Knowing Details About Tax Consultation
First you have to know what tax is? Then you need to learn what tax planning is.
A tax is an amount of money that you owe to the government so that it can provide public services. No one likes paying taxes but if you don’t pay your taxes properly, it will be a hassle for you. So you should plan ahead for paying taxes. Now you will know about taxation. Because proper taxation is very important for you. Here are some points that will assist you in making the right tax planning decisions:
1. You can reduce your overall income by reducing your spending.
2. Maximizing your tax deductions.
3. Utilizing certain tax credits.
During the COVID-19 pandemic, government support may significantly affect your taxable income.
The Goal of Tax Planning
Reduce Tax Liability: The primary goal of planning tax is to reduce a person’s tax liability. Every person wishes to lower their tax burden and save money for their future ambitions. As a result, an individual might do so by planning ahead of time and taking use of all the perks available to decrease his tax.
Minimization of litigation: Taxpayers desire to keep their legal battles to a minimum. By consulting his legal advisor and adopting proper provisions of law for tax planning, taxpayers can minimize the risk of litigation. This may protect taxpayers from legal repercussions.
Economic stability: If taxpayers pay all taxes due, the economy will be more productively invested. Prior plans have benefited both taxpayers and the economy.
Tax rates are constantly changing. As an example, the Tax Cuts and Jobs Act reduced corporate tax rates from 35% to 21% when it was passed. (Based on 2021)
Characteristics of Tax Planning
Reduced tax liability: Reducing tax liability is one of the most important aspects of taxation. To lower their tax burden and save for the future, every individual creates a financial plan.
Planning in advance: Tax plans must be made at the beginning of the fiscal year, as no one can plan to lower their tax liabilities the day before filing their tax returns.
The right direction of investment: Tax planning allows one to invest their money in the right direction by choosing the most suitable policy. Investing in any asset or insurance will not help you save money on taxes; instead, you should make the appropriate investment.
Examples of Tax Planning
Tax planning is a strategy for lowering one’s tax liabilities. By planning ahead of time at the beginning of the fiscal year, how can a person lower his tax liability? Consider the following examples:
1. With a taxable income of BDT 4,00,000, Mr. X is 47 years old and has not invested in any scheme except for a BDT 8,000 medical insurance premium. Following all of his income details and deductions, his gross tax amount will be BDT 14,224.
2. Mr. Z, who is the same age as Mr. X and has the same salary data as Mr. X. But Z invested his money in government schemes, so his gross tax amount will be BDT 0.
In this way, one can reduce his tax liability by investing in the right schemes and programs or otherwise has to pay. If you want you can also get our PEO service.We provide services on all these issues there.
1. To Maximize Efficiency, Use Tax-Efficient Accounts.
2. Compare your accounting records and mix and match them.
3. Decrease your taxable income.
4. Plan and implement the tax strategies of investors.
5. Match your investment to the right type of account.
Tax planning is necessary: Most 5 Important Steps
Taxation is necessary at some time in one’s life. In order to decrease the tax due, tax planning is necessary due to the government’s high tax rates. There are many schemes and offers in tax law. One must select the appropriate scheme in which to invest and get the benefits of those schemes. Many advantages are available to assessors, including as
1. Deduction for student loans
2. Investment in a program for senior citizens
3. Mutual fund investments
4. Investing in national retirement plans and
5. There are many different schemes available.
Advantages of Tax Planning
Taxation should be done to lower one’s tax management consulting liability, but what are the additional advantages of doing so? Let’s talk about a very significant aspect of tax preparation that every individual or organization focuses on, namely, tax savings. The primary goal of tax planning is to save money on taxes so that it can be put to better use, such as investing in a tax-advantaged scheme. It is best to set aside money at the start of the year with the intention of paying taxes with it. One should take advantage of the deals as much as possible so that he can spend the money elsewhere or save for his future objectives.
- Reducing tax liability: Tax planning helps individuals and businesses reduce their tax liability by taking advantage of available deductions, credits, and exemptions.
- Improved cash flow management: By reducing tax liability, tax planning helps improve cash flow management, allowing individuals and businesses to invest more in their core activities or save for the future.
- Minimizing risk of tax audits and penalties: Tax planning helps ensure compliance with tax regulations, reducing the risk of audits and penalties for non-compliance.
- Future tax savings: Tax planning involves forecasting future tax liabilities and taking proactive steps to reduce them, leading to long-term tax savings.
- Better financial planning: Tax planning is an important part of overall financial planning, helping individuals and businesses achieve their financial goals and objectives.
Taxation planning methods
1. Short-term: The goal of short-term tax planning is to accomplish some specific, limited tasks within a given year. With this type of taxation, one can invest within the prescribed income limit.
2. A long-term: Long terms tax plan involves activities that an assessee performs that may not pay off immediately, unlike a short-term tax plan.This begins at the beginning of the income year and continues throughout the year.
3. In the Tax System: Tax adjustments are allowed by law. There are many legal provisions in Bangladesh that provide deductions, exemptions, and donations etc.
Tax Planning Schemes
1. Policy of Life Insurance
2. A health insurance policy
3. A public savings fund
4. Government Pension Schemes
5. Schemes for senior citizens to save
Plan to pay no taxes
In zero tax planning, you reduce your tax debt so that you pay no tax. Based on reading all the provisions of the tax law that pertain to tax deductions. The best way to eliminate taxes is to plan and invest in the right programs. For example, individuals can invest in mutual funds or benefit from deductions.
As we’ve seen, there are numerous tax incentives available under the legislation that focus on and aid in the lowering of tax payments. Those who are taxable under the current tax structure can take advantage of these incentives. The income tax policy in Bangladesh has developed over time, making it easier for people to plan and save their money. It is recommended that these benefits be used within the confines of the law.