We get it, filing taxes is the last thing on everyone’s list. Calculating income, itemizing deductions, seeing what tax credits you’re eligible for—these are just some of the nuances that make filing and paying taxes extremely draining, which can lead you to putting this civic duty on the back burner.
No matter how much you hate doing taxes, it’s important to know that you legally have to pay and file every year. Procrastinating can lead you into troubled waters with Uncle Sam, which can be even more troublesome than simply filing your taxes. If you’re a procrastinator, it’s time to look at these four tax tips that can land you in trouble and cost you money.
1. Filing taxes is a federal law
One of the most important financial tips is to always file your taxes on time. Every year, the federal government requires you to file and pay your taxes, with the tax deadline typically falling on April 15th. However, this year, the tax deadline for 2019 tax returns falls on July 15th due to the coronavirus pandemic. Failing to file or pay your taxes can result in a fine. On top of the fine, your taxes will accrue interest until you pay them off, leaving you in more debt to the IRS.
If you’re expecting a tax return and fail to file, you won’t face a failure to file fee. However, the government will hold your return until you do file. If you owe taxes, on the other hand, you will face a failure to file fee of 5 percent of the taxes you owe, up to a maximum of 25 percent. You’ll also face a failure to pay fee and have interest accrue on all of your unpaid taxes.
2. You can ask for an extension
If you don’t think you’ll be able to file your taxes on time, you can file for an extension. It’s important to remember that filing for an extension only gives you more time to file—not more time to pay. You must pay by the tax deadline to avoid a failure to pay fee.
When you file for a tax extension, you have to estimate your tax liability and send your payment with your request. An extension will give you up to six months to file your taxes, and all you need to do is fill out IRS Form 4868.
An extension is a good option for those who are missing documents. Submitting your tax return with missing information can result in more trouble with the IRS. If you record inaccurate income or deductions, you’ll need to make a tax adjustment by sending an IRS Adjusted Refund Letter. This letter can help clarify any mistakes you may have made on your tax return.
3. Stay organized
Staying organized is crucial when it comes to filing your taxes. There are numerous forms and documents you need to keep track of in order to accurately file and pay your taxes. Some common documents you’re going to need, include:
- 1099 Forms
- W-2 Forms
- Receipts that qualify for tax deductions and credits (e.g., childcare, charitable giving, business expenses, education costs)
- Mortgage interest statements
To stay organized, place all of these documents in a folder or binder. You might even want to consider digitally scanning them and storing them on a cloud-based server that is secure. Doing so will ensure these documents never get lost and can easily be retrieved when you need them.
4. Get help from a tax professional
Not knowing where to start when it comes to filing taxes is a common dilemma for many Americans. If you’re in the same boat, get help from a tax professional. There are many online tax software you can use, such as TurboTax, along with mom-and-pop accounting firms, where your business can help your local community. Whatever route you tax, a tax professional will help you find all of the tax credits and deductions you’re eligible for and will ensure everything is filled out accurately.
No one wants to spend their free time tracking down documents and filing taxes. However, it’s a legal obligation required for all citizens. Procrastinating on your taxes is never an ideal situation, as it can lead to penalties and fines that cost you money. With these tax tips, you’ll be able to fill out your tax return on time, every time.