Preventing a Tax Disaster Next Year
This is the first installment of the short “Intro to Tax Relief” series, presented by Tax Defense Network. You can learn more about them by reading their full review.
Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure”. It’s uncertain whether Ben had taxes on his mind at the time, but it’s certainly applicable. What you do throughout the year will ultimately affect the outcome of your tax return. People often worry about filing because it’s the sum of all fears; the mad dash to review the previous twelve months before hitting the “send” button and crossing their fingers. A little attention early on, though, can prevent a lot of stress come April 15th.
Depending on your professional and personal circumstances, there are specific items you can address to ensure tax season doesn’t ruin the rest of your year. If you’re already dealing with a tax issue, such as paying back a debt in an installment agreement, there are additional concerns to prevent complications when you file your next return. No matter what your situation, though, you have plenty of incentives to take control of your taxes now:
An essential consideration in forecasting what to expect for tax season is what you’re withholding from each paycheck. Reserving the appropriate amount from your earnings will prevent having to make up the difference and pay in April. This is especially true for 1099 employees, who may need to estimate their taxes and pay them throughout the year. Calculating the correct amount can be tricky, so it might be helpful to enlist an accountant or a licensed tax professional to ensure you’re on target.
You may be unaccustomed to hanging onto receipts or paystubs, but anything going on your tax return should have supporting documentation. If you plan on taking a deduction for a work expense – say, gas bills spread over eight months – you should have the corresponding receipts. Again, if you’re self-employed, all of the little deductions will truly add up when you file your taxes…but shouldn’t be taken unless you can verify each one. The reason for this preventative maintenance is simple; in the event that you’re audited for your deductions, you won’t have any cause for concern. If you try to write something off without supporting records and get called out on it, you may be liable for the difference in the form of a tax debt.
Verify That Your Address is Up to Date
It might sound like a minor detail, but ensuring your address and other information is current can prevent serious complications. First, your employer(s) should know where you’re getting your mail, if for no other reason than tax time. If you’re self-employed and receive 1099’s – particularly if you’re working for multiple parties – it could be easy to miss part of your income after tax documents get sent to the wrong address. When your employer reports your income to the IRS and you don’t send in matching information, you may end up being audited and charged penalties and interest, in addition to the tax debt. Also, the IRS should also have your current address. If they need to reach you, or were to send you a letter about a liability, the problem will only get worse if they can’t locate you.
Review Your Current Situation
If you typically don’t have any trouble during tax season, you’re probably already on the right track and won’t need to put forth too much effort. On the other hand, if you’re already paying a tax debt, it’s important to proceed carefully. Should you incur a new tax debt next year, your current agreement may be in jeopardy. It’s important to make sure that any mistakes which led you to your current predicament aren’t repeated, so reviewing many of these details on a regular basis is definitely advisable. Also, correspondence from the IRS is more important than ever if you’re working through a tax problem, so be sure they know how and where to reach you.
If you find that your taxes are too difficult to handle on your own, it’s smart to get professional tax advice. There’s no sense in making a mistake that will only lead to a mess when you have to file your return. Also, if you have an IRS agreement that’s compromised by a newly acquired tax debt, you’ll definitely want to confer with a licensed tax professional. He or she can help ensure that any additional liability will be handled and see that you remain compliant with the government. As long as you address any problems early on, you shouldn’t have much reason to worry next tax season.
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*Written by Christopher Wiggins, Content Writer for Tax Defense Network.