Tax preparation is a lot of work now and a little work through out the year. That little bit will make a huge difference now, when it seems like you’re busier then ever. It is important that you do your taxes correctly each year. Tax returns that contain errors on them could be rejected by the government or lead to an audit. In some cases, failing to do your taxes properly could cause you to miss out on refunds or credits that you are entitled to.
File it Away – Organized
When a tax document comes in file it in your “Tax” folder immediately. Throughout the year if you make a transaction or business that will affect your tax return make sure to file that away immediately. You’ll be so busy come tax time that you’ll forget every transaction.
The best way to ensure that your taxes are done correctly is to use computer software. Whether you have a simple tax return or a self-employed tax return, a computer program will walk you through the process of filling out tax forms and calculating how much you are getting back or how much you owe.
Professional Tax Preparers May Not Know More Than You
Never assume that a professional tax preparer knows everything. CPA’s and CTEC’s (Here in California) are certified but they don’t know everything.
Be Ready to Verify Your Claims
If you are claiming a $10,000 deduction for business expenses, you should be ready to defend that claim if the IRS asks questions about it. Keeping receipts of everything that you purchase is a good idea. It is also prudent to keep leases, loan documents and anything else that you may need to pass IRS scrutiny if you claim a deduction on your taxes.
When Are Retirement Contributions Due?
You can contribute up to $5,500 to an IRA and $17,500 to a 401k if you are under the age of 50. Those over the age of 50 can contribute an extra $1,000 as a catch-up provision. To claim a deduction for retirement contributions, you must contribute before filing your taxes. For a 401k, you must set up the plan in the calendar year for which the deduction is being made.
Know Your Tax Deadline
Different entities have different tax deadlines. For example, individuals and sole proprietors will file their taxes by April 15th. Corporations must file tax returns within 45 days of the close of their fiscal year. If you don’t think that you can file your taxes by the deadline, you can file for an automatic six month extension. However, this only gives you more time to file. Taxes must be paid by the original filing deadline.
The tax code can be confusing to even the most seasoned tax preparers. To ensure that you are following the rules for filing a correct tax return, you should use computer software or an enrolled agent. Otherwise, you can contact the IRS for further guidance if you have a tax question that you cannot find the answer to anywhere else.