July 3, 2020 Last updated July 3rd, 2020 1,203 Reads share

A Comprehensive Guide to Tax Filing

Image Credit: DepositPhotos

Tax filing is mandatory in the incumbent days. As a citizen, it’s our social contract with the state to pay tax on a certain amount of direct and indirect taxes. Nobody appreciates across the world to the people who are not under the taxpayer list.

There are a few essentials to learn before tax filing. To understand the concept and reduce your tax bill, you need an accounting and tax solution expert to assist you in filing tax. In case anything goes wrong, you will be liable to pay penalties and fees. Whether you’re filing for the first time or not, you need an expert to help as things change on the state level.

How to Become a Tax Filer

Initially, you have to decide whether you have to file tax by yourself or through a professional. Visiting a tax professional is a more reliable option, as mentioned earlier.

If you file by yourself, an online tax preparation system, such as TurboTax, where you can fill out the form correctly with the documents attached, your financial situation must be pure because complexities of tax filing require tax consultant. Check the companies providing free tax return where you can become a filer.

Besides, some of the tax filing companies provide paid software to file a tax return. So, people unlikely to choose such software apart from the tax consultants. There is a fee of the paid software varying between $50 and $100 to file your state and federal forms. There are add-on packages in the software for tax professionals use.

If you opt for a tax consultant, you need to find a certified public accountant, also known as CPA. If the license is issued, go for that consultant as these are the only expert liable to file tax for the people. They handle a complicated matter and take consultancy fees from their clients.

When Should I File Taxes?

From January, IRS starts accepting the tax returns from the citizens. In case you expect a refund from the tax return, you have to file a little bit earlier.

For that purpose, you have to wait until you receive a form, such as your 1099 forms and W-2 income statement. It contains the details of your income from different sources. If you go for an income tax credit or child tax credit, your refund may get delayed.

When Are Taxes Due?

In July, income tax filing ends. You may apply for an extension and stretch it to the last quarter of the fiscal year. Since pandemic has hit the world, the tax return deadlines are stretch, so you don’t have to seek an extension. It has given adequate time for you to submit a return.

What If I Missed the Tax-Filing Deadline?

In case you have missed the tax return deadline, don’t get panic. Now you have to consult a tax expert. They will figure out whether you owe taxes or anticipate a refund from your paid taxes in the past year. It’s a different situation if you have taxes versus you have a refund.

If you anticipate a refund, you are still legally liable to file tax returns and should do as soon as possible. However, the IRS perhaps won’t annoy you on the money it owes you. Always remember, there are three years from the tax deadline to collect from you owed. But do it as early as possible.

Apart from this, if you owe taxes, it’s a fluid situation. You’re liable to file the return as soon as possible and pay those taxes. Mainly, if you delay in tax payment, filing can result in two penalties. First is to pay up to 5% of the unpaid taxes each month, to a maximum of 25%. Secondly, if the penalties are failed to pay on time is 0.5% of unpaid taxes. If both are applied, each month, the amount charged of the two penalties is 5% per month.

Hence, it’s better to be on toes for tax filing. Don’t fail on tax filing. It causes a lot of strains on your bank account.

Can I Get a Tax Extension?

If you’re worried about meeting the tax return filing deadline, go for an extension option. Either your tax consultant or you can file for it. It automatically pushes your filing date until Oct 15. Going for an extension will enable you to avoid failure-to-file penalties if you miss the deadline.

It’s significant to understand, an extension is for the tax filing and NOT for paying your taxes. If you don’t pay taxes on the given deadline, despite taking an extension, you have to pay failure-to-pay tax penalties. If you believe you owe money, pay them and take the extension to file later.

There is a form on the IRS Free File system, where you can get the form. Look in your state to see whether you need to file a separate form for state taxes.

Income Considerations

Everyone file taxes, based upon their income. In the last year, single filers under 65 age file taxes if they earn over $12,200. Filer under 65 who are married and file jointly if they earn over $24,400. The limit for breadwinner younger than 65 is $18,350. If you claimed as a dependent, then you must file on the income over $12,200 or the unearned income of at least $1,100. People who are dependent under threshold age report both earned, and unearned income can claim a deduction of $1,100, which is standard – or earned income up to $12,200.

Many tax consultants believe that tax filing is a good habit, whether you are liable to pay taxes or not if you earn under taxpayer threshold, file zero return. It may assist you in getting a refund on indirect taxes that you must have paid in the fiscal year. Usually, people don’t claim because they are not habitual of filing a tax return. In addition, filing your tax return restricts the probability of appearing in the audit.

Tax Audit Assistance

The name in the audit comes in different forms. If IRS find any bizarre in your tax return, they may call you for the audit. Though it may be a mistake or someone chatted you and targeted intentionally. If you file tax through H&R Block or TurboTax, you may get additional features of the audit.

If the professional tax consultant has filed your return, let them know the person. The consultant will help you to take out of the audit services, but you have to pay additionally for it.

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Sherley Alaba

Sherley Alaba

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