As tax season approaches, most people are looking forward to filing their Taxes and receiving a nice refund. However, before you file, there are a few things that you should consider and be made aware of. Here are a few facts concerning tax season.
Due Dates Are Important
Be sure to file and pay by your due date, otherwise you may suffer a penalty. The interest will also add up quickly, which will make things difficult. Your employer likely has their own due dates to send you information. The IRS has due dates on how much time can pass before they can no longer collect on federal income taxes. If you do not file your return, there may be not be a statue of limitations. In that case, the IRS can collect money from you at any time. To avoid this, be sure to file as soon as possible.
Pay Attention To The Extension Language
An Extension of time may not mean that you received an extension of time to pay. There is no cost to file an extension, however if you owe money, make a payment with your request for an extension to avoid interest and a potential penalty. If you aren’t able to pay, be sure to file on time.
You Have Opportunities To Reduce Your Bill
To receive most tax breaks, you need to act by the end of the year. The notable exception is your individual retirement account. You can make contributions to your IRA in your filing year and have it count for the previous year if you act by Tax Day.
Failing To Pay Could Lead To Drastic Measures
If you owe back taxes, the IRS could potentially take your refund, garnish your wages, or even have your passport revoked. The IRS only takes these measure if they are necessary.
There is also a lot of available information concerning tax season that simply isn’t true. Here are four myths concerning tax season.
You Can Audit Proof Your Return
There is no way to ensure that your tax return is audited. The IRS can audit people from every income bracket. All tax professionals are required to prepare returns as if they will be audited. Even if your return is perfect, there is a chance you may be selected for additional screening.
Audits Should Be Taken Personally
The IRS would like to handle audits in a secretive and timely manner. Field Examinations are performed in person by revenue agents. However, some field examinations may be conducted through correspondence if that is in the best interests of the taxpayer.
Corporations Are Taxed More
Individual income taxes make up the majority of government receipts. Corporation income taxes have rapidly decreased over the past few years.
Retirement Means No More Taxes
As long as you have income in retirement, you will be taxed. However, you will likely fall into a lower tax bracket in retirement depending on how much pre-retirement income you plan to use.
William Doonan is a tax law and legal expert.