Voices in Finance » Taxes

How to Legally Save Money on Your Australian Tax Return

Mike — Tue, 22 Nov 2011 07:43:51 +0000

If you’re in business in Australia, the probability is that you’re paying more tax than you should. The problem is that most business people don’t have the time or the knowledge base to really manage their tax properly. If you ask tax accountants in Sydney, you’ll be told that most businesses really could do better and reduce their tax significantly if they adopted structured tax management programs.

The problem

The strange but irritating fact is that there are a lot of perfectly legitimate tax allowances in Australia across all business sectors, and very few people ever bother to investigate their options. That’s quite a problem, and the baffling thing is that for anyone who’s done small business accounting the basic ideas of tax minimization are pretty obvious.

For example:

Every business has an effective tax rate. The amount of tax paid is defined by the gross tax payable less allowances and deductions.

So consider a situation where a huge range of allowances and deductions are never claimed. Ridiculous, isn’t it?

Now consider the fact that these allowances generally average around 8-15% of the total tax bill and can be quite a lot higher depending on business accounting practices, the industry involved and the type of business activity. The situation has gone from ridiculous to utterly absurd.

It really is rather grotesque. The Australian Taxation Office (ATO) can’t be accused of keeping these allowances and entitlements a secret, either. The ATO, in fact, goes to notable lengths to make sure businesses are able to access information about these entitlements. The trouble is they don’t. Australian businesses are doing themselves no favours with their taxes.

The solution

Actually, if you’re doing business in Australia, you can get all the help you need with your taxes with a phone call to professional tax consultants. The magic words here are “tax minimization”, and they don’t means some idiotic tax evasion scam. They refer to fully customized “designer” tax management programs.

Tax minimization is actually two processes:

Taking advantage of all the entitlements and allowances applying to a business. This process involves a truly detailed, fully researched study of the business and creation of a working operational methodology to ensure the business claims everything it’s entitled.
Developing the first process to create an optimum level of taxation. This may involve some alterations to how business transactions are recorded (most businesses don’t even know how to record their legitimate expenses properly for tax purposes) and in some cases industry-specific practices to take advantage of tax benefits.

To give a slightly horrifying, but appropriate description- Many businesses don’t even know that the apps on their business phone systems can create quite a range of tax entitlements. If you’ve got mobile EFTPOS, ecommerce or other functions on your business phones, you’re quite literally staring at extra tax entitlements. That’s how basic, and how thorough, tax consultants can be about finding tax benefits.

Do your business a favour- talk to professional tax consultants about tax minimization, and talk to the ATO. You’ll find they’re very much on the same page.

Reducing the Burden of Taxes

Mike — Mon, 19 Sep 2011 09:06:43 +0000

Paying tax is a real burden on any business but it need not be as hard as anticipated. Whilst it will always be difficult to wrap your head around the continuously changing labyrinth of rules and regulations, there are 4 simple steps that will make completing your tax easier when it comes to filling out your tax return

1. Using an Agent

The first decision you need to make is whether or not to use an agent. Most Sydney-Siders decide to use an accountant in Sydney in order to ease the burden on their business. It is often a sensible choice to hire an accountant because of the complicated nature of the tax system. If you are running a small business, which rents a property or deals with employee tax, then the system can become very complicated.

It is important to remember that the individual is always responsible for the contents of their of their tax return, even if they have paid someone else to submit it for them. When taxes are more simple and not complicated by transactions between businesses then it can be sensible to complete them yourself. It can put you in a better position to have completed the tax return yourself if you are challenged on the contents of your claim. Be sure to make an informed decision about using an agent.

2. Avoid mistakes

Whilst avoiding mistakes sounds remarkably obvious, it is the most common cause of delayed tax returns. On the ATO website there is a list of common mistakes that have been made in the past. Be sure to check and double check your application before submitting it because there are fines which can reach up to 90% of your owed taxes should you fail to declare your situation truthfully.

3. Electronic systems

Make use of the electronic systems when paying taxes to benefit from automatic calculations and a faster speed of return. Filling out your tax return online will mean that it is dealt with at a faster rate so you will get your rebate sooner. The systems will also enable you utilise automatic calculations which will help you to avoid errors.

4. Organise

The single most important element of making your small business accounting easier to manage is a good organisation system. Having good organisation from the outset of the financial year will make filling out your tax return much more easily. Being organised need not be difficult and need not consume large amounts of space. By scanning all bank statements, bills and receipts into your computer you can establish an archive of everything you could need on demand. Being able to supply evidence with the click of a button will relieve the stress created by taxes and enable you to deal with any questions that may be asked of you at a later date. Before beginning your filing, system make sure you know what it is you need and how long you will need it for. By doing this you will be able to tailor your filing for your business and always be prepared for any request.

How to Use Your Tax Return

Mike — Sun, 15 May 2011 14:33:24 +0000

You have your tax rebate in your hand and all you need to do now is decide how to spend it.

It may be more beneficial to use the money to improve your financial situation for the long term, rather than making a big purchase in the short term.

A good way to use your tax return effectively is to put it towards savings and debt payment or start an emergency fund.

There are lots of savings accounts and investments worthy of your tax rebate, depending on how you want to save. Setting up a regular savings account with the tax rebate and adding money to it each month is a smart financial decision.

Easy access and online accounts are great ways of keeping tabs on your savings from the comfort of your computer. Money can be withdrawn at any time and you can search for a wider range of accounts as you will only need a computer.

Fixed rate and notice accounts offer higher rates of interest and will make your money work harder, although you will be unable to access it for a set time period.

Using the money to set up a children’s savings account is a great way to encourage children to save from an early age. Invest each month and add in money from birthdays, for example, to gradually increase the pot. This can then be used for the future for university, a wedding or a first car.

Investing the money for the long term is the greatest risk with your tax rebate, but could gain the most in return. Depending on the amount of tax rebate, contemplate investing in more long term accounts and options to gain a good return.

If you have debts, then use the tax rebate to pay down debt in the first instance before opening savings accounts. Look at all your credit cards or loans and work out which debt has the highest interest charge and final balance and pay this off first.

Pay off debts, particularly if you get late notices and incur late payment charges and your credit score will be grateful. Once bad debt is paid off, you can put together a financial plan to ensure future money can be saved.

A good way to ease debts from multiple lenders could be to take out a debt consolidation loan and it may be worthwhile to look for the cheapest loans at moneysupermarket or another comparison website.

Starting an emergency fund is a good and wise use of a tax rebate, to save money for a rainy day. This way, when unexpected or financial emergencies arise, you gain some protection from debt.

Credit card and loan debt often arise from these unexpected bills, such as the car needing to be fixed or a vet bill.

If you already have a good financial plan in place, use the tax rebate to over pay on your mortgage. Most mortgage lenders allow small overpayments and this can make an overall impact on reducing the timescale.

Use your tax rebate to improve finances rather than going out straight to the mall to spend and you will gain much more than a one off purchase you probably don’t need.

Tax Refund Advance and Rapid Refunds

J. Hamilton Fraser — Sat, 18 Sep 2010 00:52:15 +0000

The Tax Refund Advance vs. Rapid Refunds

In the US, People who use professionals to file tax returns are given two options for receiving their money. The first is through a tax refund advance and the second is through a rapid refund. To determine which one is better, you must understand the basic premise through which they operate.

The Tax Refund Advance

When taxpayers receive their money through a tax refund advance, they initiate a special type of loan. This loan is paid out through the funds of the tax preparer. In exchange, the preparer receives a hefty amount of interest from their customer. This is on top of their actual reimbursement, (which comes from the IRS after the taxes are filed). Altogether it takes around ten days for the loan to come through. Interest is charged the whole time.
Ten percent of all Americans are using the tax refund advance to receive their monies faster. This means that over $500 million is getting spent every year on refunds.

Things are even harder for individuals in the lower income bracket, as they are the primary targets of this loan. In fact, when the tax refund advance started in 1975, its initial audience encompassed individuals who would receive an earned income tax credit. The reason why this was a factor was because the credit was expected to bring about a very large refund. For tax preparers, this meant a larger interest payment.

True, to some folks the thought of paying $100 for a $500 return seems ridiculous. However, for some households this is the only option. For them, it is a matter of getting what they need right now.

Rapid Refunds - A Better Alternative

Things work differently when a person gets a rapid refund. While it cannot guarantee a 10-day-or-less waiting period like the tax refund advance, it does put money in your pocket faster than the IRS. With rapid refunds, taxpayers only have to wait a couple of weeks for their money. In some cases, the refund is received in a few days.

With that being said, you might be wondering how rapid refunds work. Basically, there are two options for refund. One of the most common uses a debit card. This card gets funded with the refund minus any fees. From there, it can be used like a normal credit or debit card. This includes the ability to take out cash from ATM machines.

Direct deposit is another option. It is usually the number one choice for people who have checking accounts. Money is deposited right into a person’s account with no questions asked. Yes, the overall amount will still be a little less because the tax preparer must take out their fee. However, since direct deposit is a little easier, it is often cheaper than the debit card option.

Of course, regardless of which method you choose, one fact remains the same. With a rapid refund, you do not get charged interest. Whether you are owed $200 or $20,000, all you have to pay is a small fee to get the process initiated. After that, the money is yours free and clear!

American Tax Relief By Congress

J. Hamilton Fraser — Sat, 04 Sep 2010 20:17:09 +0000

On December 20, 2006, a bill was signed by Congress offering certain individuals tax relief. This bill is called Tax Relief & Health Care Act of 2006, and it was officially signed in the later part of the year and became effective in 2007. The biggest effect the bill had was that it allowed individuals to claim either local taxes and state taxes, or sales tax, as a deduction.

It provided for American tax relief in a number of areas. There are a few points provided in the bill which aim to help education by providing a subsidy. Also, tuitions and fees for higher education were made deductible. Most significantly, there are now deductions available for expenses a teacher incurs out-of-pocket for classroom supplies. Now, teachers are allowed up to $250 each year that they can claim as a deduction on their taxes. These deductions only apply to teachers for elementary and secondary schools. The old corporate tax credit for research and development was revised to take into considerations the changes in technology. This bill also provided for the establishment of the foundation for a Health Savings Account Program (HAS) for all Americans. This program allows citizens to be able to invest money in a non-taxable savings account that is earmarked only for health care. The deductions for an HAS can reach a maximum of $2,850 each year. The bill was designed to provide a sweeping effort in helping to relieve the tax burdens of millions of Americans.

Corporate Tax Relief signed by Bush

On October 22, 2004, a bill was signed providing corporations with an increase in tax relief. Signed by President Bush with very little announcement, the bill was actually the biggest tax revision that was passed during Bush’s administration. This bill itemized $136 million for new tax breaks, almost all for businesses. Many critics claimed that this bill rewarded the multi-national corporations that decide to move overseas. Bush responded by saying that the bill would help save manufacturers approximately $77 billion over a ten year period.

The bill provided many deductions not only for food producers, but for many top corporations. Unfortunately, the bill was also coupled with a $136 million worth of tax increases to keep our federal deficit from rising. Many Democrats accused the proponents of this bill of practicing creative accounting in order to hide the eighty-billion dollar actual cost. This bill was originally designed to repeal the illegal five-billion dollar (affirmed by the UN) tax break aimed at American exporters. The bill grew throughout the legislative process becoming one of the biggest in-scope tax reforms that has ever passed.

American Tax Relief

J. Hamilton Fraser — Wed, 01 Sep 2010 03:40:15 +0000

Attempting to find detailed information about American tax relief is not the easiest task in the world, but there are some good sources of information out there. We’ve compiled some information about the general topic in order to help you out. The first thing to be weary of is, scam artists looking to make a quick buck on people in trouble with the IRS, high priced CPAs and attorneys may end up having you pay your original debt to the IRS, plus their regular fees.

The next thing to be aware of is that the IRS may end up double checking your work. They will prepare a return with the information that you have given them, and the information they have on record. Using this information they will make an assessment of taxes on your earnings for the year. Do not give them anymore ammunition then they need, be sure to not bring any documents to an audit that involve years other than the year that is under audit, along with that, do not bring anything that was not specifically in the audit notice.

If the IRS finds you owing money, they may offer you what is known as an offer in compromise. What this means is that you agree to settle your tax debt for an amount less than what you should be paying. The IRS does not have to offer this to you, but if they do you should strongly consider taking it.

If you find yourself in dire straights and can not afford your tax bill, you should at least still file your return. The Debt Relief Act may allow you to exclude certain qualified principal assets, if the balance of your mortgage is less than two million dollars. However take into consideration that this act only applies to the taxpayers main living residence.

Settle Tax Debt Today

J. Hamilton Fraser — Fri, 25 Jun 2010 16:42:00 +0000

The IRS (Internal Revenue Service) in the US modified the forms and instructions for their Offer-in-Compromise (OIC) program in July of 2006 to complement the Tax Increase Prevention and Reconciliation Act. The new policy requires applicants of OIC to promptly start making payments on their proposed offer.

Things You Need to Know

Filing an OIC is one of the five strategies to swim out of the sea of debt.

The OIC program is the only method to settle tax debt for an amount less than what you essentially owe. However, this program has been misconstrued by many consumers and at times abused by dishonest and unscrupulous tax preparation services.

On 16^th of July 2006, all OIC applicants are required start making payments on their proposed settlements. They can choose from the three payment choices; lump sum payment, monthly payments throughout the remaining statute of limitations, or payments on a monthly basis over 24 months (2 years) or less. Under this new law, all applicants are also necessitated to provide 20% down payment if they prefer lump sum payment plan, or should start making payments monthly if they go for one of the two monthly payment alternatives.

In addition, the Internal Revenue Service started to go after obnoxious tax preparers who send offers that do not convene with the IRS eligibility qualifications and requirements.

IRS Forms

The IRS made it almost effortless to prepare and submit an offer by stipulating instructions that are easier to read, understand, and follow.

To settle IRS debt conveniently, you can procure all the forms for Offer in Compromise settlement as well as the instructions in a booklet through the IRS website, known as Form 656-B in PDF format, composed of 46 pages. If it is more expedient on your part, you can contact the Internal Revenue Service at 1-800-829-3676 and request them to mail you the booklet, or you can drop by in your local IRS taxpayer assistance center to pick it up.

Note that the IRS charges $150 as user fee to process your OIC. You need to recompense this fee whether you work with a tax professional or you arrange the offer yourself.

Using a Tax Attorney for Tax Relief

J. Hamilton Fraser — Sun, 16 May 2010 00:18:11 +0000

Tax attorneys specialize in providing legal services for people or businesses that pay taxes. In addition, there are various types of tax attorneys specializing in different areas of the law and numerous reasons to use one.

A few of the different specializations include IRS, corporate, debt management, business, fraud and even international tax. When choosing a legal professional, previous experiences practicing the specific field or personal/professional recommendations and the proper certification or license to practice law are major factors to consider. Many law schools offer specific programs or classes to provide education in this are of law. Additionally, many tax relief attorneys specializing in tax law have backgrounds in accounting and finances and should be very familiar with state and federal tax laws. Many lawyers charge an hourly rate, as well as a retainer fee and will give a general estimate based on the individual situation of what the overall costs may be.

Common reasons to use this type of legal professional include lack of understanding of filing taxes or having back taxes or complicated tax returns, or when the IRS is investigating you and especially in cases where large amounts of money are involved. In addition, in some cases of death, there are estate taxes to handle that many people are not familiar with. Another reason is the fact that the tax lawyer is exempt legally from having to testify against their client. Often a tax relief attorney can also offer other legal options that other financial professionals such as accountants cannot or are not aware of. For example, the tax relief lawyer can offer bankruptcy as an option and can provide legal help in this situation. They can also represent the business or individual in meetings with the IRS without the client being present and help in avoiding or reducing penalties.

Getting a Lawyer for Your Texas State Planning

J. Hamilton Fraser — Fri, 14 May 2010 07:39:12 +0000

Good estate planning is not just drafting a will and testament. For people who live in Texas and want to start their estate plans right away, it is advised that you call a lawyer to help put your Texas estate planning into place. Getting a tax lawyer in Austin will help you minimize taxes and other fees. They will also give you sound legal advice on how to set up contingency plans for your wishes to make sure that your will is followed. This can include your health care treatment in case you are disabled along with other wishes.

When it comes to finance issues, getting a lawyer is an easier way to coordinate business, investments, stocks, and to whom your home and your properties should go to. This can also include your life insurance and your employee benefits.

Many people however ask if they should put in place an estate plan. For people with children who are still minors should have a plan like this. If you have property that has sentimental value it is also advised to set up a plan with a lawyer. If you are concerned about your health care treatment in the event that you are no longer capacitated to decide for yourself, you should contact a tax lawyer immediately. If however you do not meet any of the categories, you do not need an estate plan.

For people interested in getting a plan on the other hand should be aware of the following documents that are needed in such an endeavor. Your last will and testament is needed here, this will be part of the process and a way for you to transfer your properties to your children and to other people. The said document will also include the name of your personal representative, typically, your lawyer to carry out all the instructions in the said document. Your power of attorney when it comes to your health care can also be included in the will.

401k and Retirement Facts

J. Hamilton Fraser — Mon, 05 Apr 2010 14:41:39 +0000

A recent study revealed that over 40% of Americans have less than $10,000 in savings. That figure covers any kind of savings — retirement, emergency fund, kid’s college fund. While the economic downturn has helped begin a sea change, helped begin to turn American from spenders into savers, there is still work to be done.

The same study found that a quarter of Americans have stopped any retirement savings in response to the uncertain economy. When surveyed, only about half the workers said they have done any sort of retirement planning. Calculating your retirement needs is a vital part of financial planning. What all this tells us is that we don’t know how to deal with the financial crisis and therefore we will ignore it. If we stay mired in the day to day of working, however, and don’t focus on a goal or end result, Americans will find themselves having to work well into their golden years.

In 1978 Congress enacted the changes to the tax code that allowed the first 401k accounts to be created. The creation of the 401k system was in response to the slow decay of pension plans. Between the cultural changes of workers no longer staying with a company for life and the loss of any sort of guarantee of life-long employment (a real chicken and egg scenario), the 401k system was a lifeline for the American worker. Over the years the code has been amended to include important tools like the 401k rollover, the Roth IRA and the individual 401k account for self-employed people.

Over the last twenty years, the news has regularly predicted the demise of Social Security. Instead of spurring people to save more, it has had the opposite affect. People feel adrift. The only cure for this aimlessness is hard-nosed planning and goal setting. No one, certainly not Uncle Sam, is coming to rescue us, so we have to save ourselves.

Start 401k investing today. Start right now. If you don’t have a 401k account through your company, ask how to set one up. Put 10% of your paycheck into the account. In two months you will forget what it was like to have that extra $100 a month. Take a hard, mature look at your spending. Where does your money go? Get a written budget and stick to it. Again, in two months you will be settling into the routine of spending less than you make. Your best wealth building tool, the thing that is going to make your retirement years truly golden, is your paycheck. Don’t squander it.