It’s often said that the only certainties in life are death and taxes, and unfortunately, this isn’t far from the truth. Since taxation isn’t going away anytime soon, it’s worth understanding as much as you can about this staple of modern life. With this in mind, here are four things you probably didn’t know about taxes:
You Shouldn’t Actually Pay More Tax On A Second Income
Many of us grew up being warned against having more than one job for the simple fact that we’d end up paying far more tax than we should on our second income. While you’ll probably lose more out of each pay during the year (as you’re unable to claim the tax-free threshold on more than one income), the tax you owe will still only be the marginal rate for your total income. Use a tax calculator if you’re unsure what that rate is, but rest assured that if you’ve been overcharged, it will all come back with your tax return.
It’s Possible To Owe The Tax Department
Just as the tax office will return any excess money they’ve taken from you, if you’ve underpaid over the past twelve months, you can and will get slapped with a tax bill. This is a rare occurrence for those working for a single company as PAYG policies generally protect you against underpayments. However, if you have multiple streams of income (such as investment dividends or a second job), you may have ended up paying less than you’re required to. If this is the case, you’ll want to hope your deductions save you from a painful tax bill.
You Can Claim A Lot More Than You Think
Tax deductions are plentiful, so long as you know how to look for them. For example, although driving to and from work isn’t considered a deductible expense, travel from the office to a site that you have to visit can be claimed back at tax time. Similarly, laundering your work clothes can also be a deduction under certain circumstances, as can your phone bill and many other surprising expenses.
Engaging the services of a tax professional is the best way to ensure that you’re claiming all relevant funds. The best part is, you can generally claim back your bill from them the following year, so you’re essentially getting free assistance.
Not All Donations Are Tax-Deductible
While you can claim many things that you probably thought you couldn’t, the flip side of this is that there are probably things you assumed you could claim that aren’t actually claimable. Donations to charity are a prime example of this tax trap. Although most charitable donations can be deducted at tax time, any donations for which you receive something in exchange – say a raffle ticket, soft toy, or gift hamper – isn’t technically tax-deductible.
You should, of course, continue to support your preferred charities. Just be careful with what you claim at the end of the financial year. That way, you won’t have to stress about being audited.
There’s obviously a lot more to dealing with your taxes than these four points, but they are some of the most confusing ones. If you’re at all unsure about your taxes, we strongly recommend seeking the assistance of a professional. They make their living from understanding how to deal with tax season, so having their help will cover you if anything ever goes wrong. Happy deducting!