Many people know the month of April as tax season. The middle of April is when all tax returns have to be submitted to the IRS, unless you file for an extension. With the tax deadline coming up quickly, many people will rush to finish their taxes this week. While not all tax filings are complicated, minor mistakes can raise red flags with the government. More than half of all tax returns, about 57% are done by paid preparers. The most common reason for hiring tax preparation services is to avoid IRS audits. Avoid tax penalties or troublesome tax audits with these additional tax filing tips.
Keep documents and records of everything
If you plan to file your taxes with the long form, meaning that you will be claiming specific deductions, ensure that you keep records of everything throughout the year. Although you will not submit these receipts and documents with your tax return, they are required in the event of an audit. Even if you pay a CPA to file your taxes, you will want to keep all of your records throughout the year. They cannot protect you during an audit if you do not have proof of your deductions.
Hire a professional bookkeeper
You may also want to consider outsourcing your bookkeeping needs. This is especially true if you are self employed, own your own business, or have complicated income proceeds. It may also be helpful to hire an accounting bookkeeper if you are not organized enough to keep detailed records. Keeping detailed track of all of your paperwork and documents throughout the entire year can be confusing and time consuming.
To reduce your liability
Whether or not you owe the government or receive a tax refund will depend on many factors, including your tax bracket, your deductions, and your income level. You may be overpaying the government if you are not claiming all of the deductions that you quality for. The tax handbook is extremely long, making it pretty much impossible to read through all of the available deductions. Working with tax preparation software can help you minimally, but may still cause you to miss some important deductions. An accounting professional is usually well informed and can recommend you additional deductions to reduce your liability level.
Currently, the average standard deduction is $7,000 to $8,000. ($7,884). Itemizers on average claim $26,084. Your accounting professional will inform you which deduction situation is best for your specific financial case. In most cases, business owners and contracted workers who receive a 1099 tend to deduct more than those employees who receive a W2. As a 1099 employee, you are responsible for your own business costs and you are not taxed throughout the year.
Prepare for taxes ahead of time
Last minute tax preparations are going to be more expensive. If you have yet to file your taxes, you may want to file for an extension and then find a tax services company. If you attempt to meet the deadline at this point, you will most likely be late and could be subject to a fine. For next year, begin preparing for your tax submission earlier in the year. You should receive most of your tax documents by the end of January. Mail them to your accounting professional at that time and tax season will no longer be so stressful. Preparing earlier will also reduce your chances of being audited.
Tax season is upon us. Currently, Americans spend 7.6 billion hours each year doing taxes. The amount of effort and organization that you put into your taxes can affect your tax refund or tax amount owed. Because of the possibility of a tax audit and expensive penalties, many people choose to hire an accounting professional. CPAs are specifically experienced in the different tax codes and in finding additional tax deductions. They also reduce your chances of being audited, because they are aware of submission regulations. As the tax due date quickly arrives, ensure that you have correctly submitted your tax documents.