Tax filing comes just once in a year, but the hustle and bustle that come with the process often feel like a yearlong event. Whether you are filing for personal or professional use, it is important to understand your filing obligations and the implications they might have to your finances. You should, therefore, file early enough to avoid the last time uncertainties. There are a few important things you ought to remember before, during and after you prepare your returns.
Organize your records
Track your expenses and make sure your receipts are well kept in a place you can access them with ease. If you don’t, you run into the risk of missing out on significant deductions if you cannot trace some of your expenses receipts. The strategy is simple; before you start filing ensure you have all the paperwork ready. Accountant Paul Miller recommends you keep a file where you put all your documents, receipts that will facilitate your filing.
Itemize tax deductions
It is important that you itemize all the possible deductions. These are items you can make a legitimate claim and see how they affect your tax returns. Remember that even small expenses which you would otherwise dismiss as miscellaneous such as job hunting expenses or work related millage costs can count as deductions only if the totals when combined can constitute up to 2% of your gross income. Similarly, you can take advantage of what the IRS calls adjustments to income. These are deductions you can still claim without itemizing.
Reduce your taxable income
There are several ways you can do this, for instance, you can take above the line deductions to reduce your taxable income and save you money in the process during tax time. Similarly, if you have a health insurance cover, you can take a higher credit premium tax when you file your taxes. It is aimed towards lowering your taxable income hence saving you money.
Consult with your tax and financial advisors
Filing tax can be a headache and even a nightmare for many. Deductions and expenses, especially to those of us who lack financial knowledge, are just elephant terms. Your advisor, however, understands plenty of this jargon and knows several strategies in the book you can use to minimize your return. He is also conversant with recent IRS rules and can, therefore, advise you on how you can avoid penalties and audits. Even if you are confident with your filings, it is always advisable to run by them before you submit.
Dependents social security numbers
You already know that if you head household with dependents, you are eligible to claim credit for every dependent you have. To do that you need to provide their SSN. If you are divorced, you need to discuss with your ex-spouse to confirm that they are not claiming the same. A double claim can result in delays and even sometimes attract a penalty. For every child in your household who is under 17 years, you can claim up to $1000 per child tax credit.
Mark the deadlines
IRS is keen on due dates and lateness often attracts penalties and interests, and they can add up very quickly. Failure to file taxes can be termed as default which can attract a criminal charge. Additionally, there is no statute of limitations if you fail to file meaning the IRS is at liberty to assess and decide to collect at any time. So, to avoid running into running battles with the federal government through the IRS ensure you file in time and even if you are late just file at any time. You can also request an extension, and they can graciously allow it to you.
Filing taxes is a must do failure to which there are federal rules implications involved. Before you file your taxes, there are few things you must remember some of which have been discussed above. Remember to talk to your advisors; they have a deeper understanding of the tax processes and regulations. They can, therefore, spot a red flag a mile away and warn you against. Also, remember to check and mark your calendar; otherwise you will be in trouble.