Final answer:
True, organizing financial records to maximize tax credits, and investing in tax-sheltered retirement accounts like RRSPs and TFSAs, are effective ways to minimize taxes. These strategies defer taxes until retirement, increasing the return on savings.
Step-by-step explanation:
True, organizing your records to take full advantage of tax credits and deductions, as well as investing in tax-sheltered accounts, such as RRSPs (Registered Retirement Savings Plans) and TFSAs (Tax-Free Savings Accounts), are indeed effective ways to reduce tax liability. These strategies are legitimate and widely used for financial planning and retirement savings. By investing in retirement accounts like 401(k)s, which are offered through employment with special tax status, individuals can defer taxes until the funds are withdrawn after retirement. Similarly, IRAs (Individual Retirement Accounts) enable savings to grow tax-deferred. These accounts increase the return to saving because they are not taxed in the present. States in the U.S. also offer certain deductions, and some don't impose an income tax at all, which can have implications for overall tax strategy. It's important to start planning and saving for retirement as soon as possible, considering that Social Security is not expected to fully support a comfortable retirement.