6 Strategies to Minimize your Taxes this 2013
It’s never too late to realize things even if it’s already almost half of the year 2013. For example, you failed to realize that it’s already May but you still haven’t enjoyed summer (The rainy season is already looming). Or since Election day is also fast approaching, you failed to realize that you haven’t properly chosen who to vote.Life is full of that kind of late realizations in general. I
It’s never too late to realize things even if it’s already almost half of the year 2013. For example, you failed to realize that it’s already May but you still haven’t enjoyed summer (The rainy season is already looming). Or since Election day is also fast approaching, you failed to realize that you haven’t properly chosen who to vote.
Life is full of that kind of late realizations in general. It is just the way it is. Although it’s rather annoying to note that this event is inevitable, you can do something to battle it especially if that realization will affect your future.
Don’t let late realizations halter you from saving and securing a financially sound life after work. There is more to it than what you expect it to be and making that realization now to identify tax saving strategies will affect not just your work but your personal life.
Here are some ways in which you can save taxes on the current year so that before this magnificent year ends, you can use much of your savings for other more important things.
Take Advantage of Exemptions in Connection to Philippine Taxation Laws – There are two types: personal exemptions and minimum wage earners exemption.
(a) Personal exemptions are now pegged at 50,000 pesos in an annual basis; also called Basic Personal Expenses (BPE) which is applicable to every taxpayer regardless of whether they engage in business, practice specialist professions (doctors and lawyers) or earn pure compensation income.
(b) Minimum wage earners exemption was formally signed into a law under former President Arroyo’s time. So if you are being compensated only on a minimum wage, you must not pay income taxes. The law also reaches out to all holidays, night differentials, hazard and overtime pay; all tax-exempted.
Determine Tolerated Deductions in your Gross Income – there are also two options: First is the itemized deduction wherein you choose from a list of expenses within a taxable year what you include for deduction. Notable items include rental expenses, charitable contributions and pension trusts. Second as an individual payer you can opt to deduct as much as 40% of your gross sales or receipts instead of itemized deduction.
Opt to Quit smoking, or Gradually Lessen Addiction – Ever heard of the newly approved Sin Tax Law? That’s one tough nut as it has been vastly debated by many affected groups with the health advocates on one end and the tobacco farmers on the other. But for the normal citizen who has this bad habit of smoking you can actually lessen expenses by planning to quit now. And of all the tax saving strategies here, this one’s the most readily available option you can immediately act upon.
Prices for virtually every tobacco brand known to you escalated since taxes for these products also went high. Be part of the many Filipinos who’d rather quit the habit than to further dig deeper holes in their pockets in the long run. Or since medical advice tells you not to overdo the quitting abruptly, do it safely in a gradual manner.
Take advantage of Senate Bill 2855 – If you have qualified dependents there is the Additional Personal Exemptions (APE) wherein the previous limit set for tax deduction claims for every dependent is now lifted just recently (http://newsinfo.inquirer.net/349367/senate-oks-bills-on-tax-exemptions-incentives). Also, the law aims to grant tax incentives to manufacturers of alternative-fuel vehicles or the what is commonly called hybrid cars. This will doubly impact the normal Filipino lives and the environment.
Tax Avoidance – which is a play on semantics that which does not make any taxpayer liable for not paying taxes through creative but legal means; it deeply contrasts with tax evasion wherein legal complications may arise against offenders. But be wary that the government of the Philippines frowns upon such practices especially if you’re a foreigner engaging business in the country’s Chinatown.
Citizen Tax Planning – BIR (Bureau of Internal Revenue) Commissioner Kim Henares lectured about being honest in declaration of one’s real profit and an increase in voluntary compliance. This may perhaps be due to the Bureau’s issuance of RMO 4-2013 which considers all taxpayers as possible candidates for audit. Priority is given to sole proprietorships and practicing professionals. So whether you want to pay or not is irrelevant, you are now forced to pay a certain amount.
But anyway, due to the many exemptions already set in place, becoming honest actually have its incentives.
Tax saving strategies aren’t new things just recently introduced but rather old habits that let honest tax payers gain benefits by simply knowing real laws pertaining to taxation. One strategy may work for some but not for the others. In a country like the Philippines where corruption remains, the strategies are very different as compared to first world countries.
So for Filipinos out there, the moment you realized what you’re doing is not aligned to what these strategies tell you then try seeking for professional help. A friendly local firm may just be nearby, awaiting for your inquiry anytime soon.