Last Updated on February 1, 2023 by Guest
When it comes to filing your taxes, you may find yourself in a conundrum. The complexity of the process and the legalities involved adds to the difficulties of the task.
It shouldn’t really have to be so.
With the right set of tools and help from tax pros, you can easily get done with it. And in no time, make your day available for other important tasks that require more attention and detail.
What Goes Into The Tax Filing Process?
As such, the income tax would only include sources of income. For example, income from rental properties, primary income source, and in some cases, even the profits on investments.
However, it is also noteworthy that not every income is taxable. More so, taxes on income from different sources are also calculated differently. The taxes could be more than others for some income sources, while some may be totally exempt from taxes, as already mentioned.
For example, the tax rate for profits earned from personal assets is usually higher than that on the primary income.
But, how do you calculate the taxes and file them so that your taxes don’t pile up? This article – Don’t Let Unfiled Tax Returns Follow You – mentions that one unfiled tax return can quickly spiral into trouble with IRS. And believe it, the IRS won’t cut any slack.
So, how do you file your taxes? Keep reading to know your options.
Different Ways To Opt When Filing Taxes
Not only is it important to file the taxes, but also to file them the right way. Any discrepancy in tax calculations can easily make matters worse and even invite IRS audits. Surely, you wouldn’t want to be in any such situation.
Generally, there are three options that you can undertake. But before we discuss these three, it is noteworthy that each of these has its own limitations at play. And accordingly, you need to modify your tax filing procedures to avoid any troubles down the line.
Now, that we have the doubts out of the way, read the options below.
The first way to file taxes is to do it the conventional way. Familiarize yourself with the tax laws and the rates applicable to your income. Pick up your calculator and start computing your taxes.
It needs no mention that this process is time-consuming. And also, there is a high possibility for errors.
Upon calculating your taxes, you’ll need to arrange all the details in the proper format. Further, you can log into the official website of the IRS and submit your tax details, along with paying your taxes.
You can also choose to file it in pen and paper. Pack all the necessary documents and your tax filing receipt and mail it to the IRS’s office.
Step Further With Taxing Software
The better alternative to the pen and paper process is using tax software. These tools are more or less automated and efficient in tax calculations. All you need to do is fill in your income details, the sources, and invoices for your expenses. The software would calculate your payable taxes.
More so, you can even choose to file for the tax through the software only. Several software providers have in-built IRS plugins that can link your tax documents with the IRS’s database in real-time.
However, tax software also has some limitations. For instance, it cannot differentiate between income and profits. Also, for cases with pending taxes, the software might give the wrong value.
It is rather advisable to double-check your tax documents before submitting your ITR with the IRS.
There’s Nothing Better Than Hiring Tax Attorneys
So far, the best way out is to have a tax attorney by your side. The professionals are equipped with the updated legislation and can help defend your case when faced with audits.
Moreover, tax attorneys can also help you save a lot in taxes by including only what’s necessary. For example, your tax attorney would know which asset classes are taxable and which ones are not.
Your tax attorney would also be able to keep your tax records for the tally. This is especially beneficial when you are faced with an IRS audit. Your attorney would then also help you play defensive.
Not only can they help contest with the audit charges but also prove your innocence or negligence. If not eliminate the possibility of facing criminal charges, they can help reduce the severity of the penalties.
Filing taxes is not only about clearing your tax dues. As a business owner, you need to protect your business from one and all threats. It needs no mention that legal or financial troubles are one of the greatest of all the threats.
You may need to take some additional precautions to avoid troubles from the IRS.
Some Cautions To Take When Filing Taxes
Here are some of the cautionary actions that should help you avoid IRS troubles for the good.
Filling In Your Personal Details
One of the biggest mistakes that many tax filers make is filling in wrong personal details. You should be extremely careful with the spellings and formatting. Include your EIN and your social security details carefully.
The next thing you should double-check is your employment status. If you’re self-employed, mention the details about your enterprise. Or, if you’re employed, mention your employers’ details carefully.
Insurance, Investments, And Asset Details
Whether you’re self-employed or not, you need to clearly mention your insurance, investment, and other asset details. It includes your home ownership details, personal property, insurance policies (including all – motor, medical, personal, etc.), and other assets.
Expenses And Income
Last but not least is carefully mentioning the details of your income and expenses. As a rule of thumb, whatever amount is credited to your bank account or you receive in cash should be considered your income. It also includes the loans that you take out. Likewise, all of your expenses should also be carefully mentioned when filing your taxes.
Being vigilant and staying up to date with your tax records is the best thing you can do to protect your personal and professional wealth. Filing your taxes with the help of an attorney, thus far, makes it the best bet for financial security in the longer run.