Issue in personal finance Research Paper Example | Topics and Well Written Essays - 1250 words

Issue in face-to-face finance - Research Paper ExampleTaxes ar the compulsory charges against the income. Taxes are charged as per impose laws and these laws include provisions whose right understanding can lead to minimization of levy liability. This report testament discuss the ways in which measurees on incomes can be minimized to leave individual with uttermost possible take-home-pay to support his/her financial plans. This report will discuss impose management issues in the position of United States tax laws. Tax Administration, Nature of Taxes and Tax planning US citizens pay the largest amount of tax on incomes (Garman, 1999). In US the Internal Revenue Service (IRS) is responsible to collect tax on personal income of US citizens. The tax is collected as per the rules of Internal Revenue Code. The nature of US income tax is progressive which implies that higher tax would be charged from high income recipients and vice-versa. In progressive gross system higher margina l portions of the income are charged to tax at higher rate. There are two ways in which U.S citizens discharge their tax liability. One method is tax withholding by employer. Employer deducts a specific amount on account of employees tax liability from its paycheck. ... Tax is nonrecreational in four quarterly installments of April 15, June 15, September 15 and January 15. Rationales behind avoiding tax or minimizing it Paying tax involves the opportunity cost of forgoing some consumption that could have possibly satisfied a want. and the substantial amount of money given in taxes also involves a loss of possible enthronement of that money in some venture that earns an interest. Hence if tax liability can be cut legally, it is likely to benefit tremendously individual in terms of higher income to support his/her financial objectives. ship canal to legally minimize tax liability 1. Reduction in taxable income If taxable income is somehow trim back it would result into lesser tax liability for an individual. There are various provisions that can wreak taxable income reduced. One such provision is the deduction allowed on account of contribution to IRS approved health premium plan. Under this plan employee pays a certain amount for heath benefit premium. This amount is allowable from income when calculating the taxable income. Hence such amount avoids income tax, social security and Medicare. Flexible spending accounts is another(prenominal) tax shelter offered by employer. In this case employee is supposed to make contributions into government approved medical examination or dependent care reimbursements accounts. Such amounts are deducted when calculating taxable income and hence avoid any charge on account of income tax, Medicare or social security. 2. Tax-sheltering rejoins on investment Congress permits several investments whose return is exempted from tax either or such investment, in some way, cause reduction in tax liability. Such tax-shelter i s provided