Secure Financial Freedom With Our Guide To Tax Season
Although tax season is approaching, many taxpayers are simply not ready to file their taxes! Nearly 14 million Americans find themselves in hot water with the IRS every year due to back taxes. Oftentimes taxpayers wait until the last minute to submit their documents, causing many financial consequences.
As presidential incumbent Biden prepares to take office in 2021, many tax changes (such as COVID-19 relief) are expected to take place. With all the being said, now is the perfect time for individuals to begin preparing for tax season! Therefore, the Lifeback Tax team has prepared an easy guide to ensure you are ready for April 15.
Gather All Tax Season Paperwork
Taxpayers who wait until the last minute to file their taxes will likely find themselves scrambling to get their eggs in a basket. In order to make the most of your time, you should be filing and organizing all pertinent financial documents throughout the year. Waiting last minute to gather financial documents often causes taxpayers to miss certain files.
In order to ensure you have all necessary documents, we suggest making a checklist with the following:
- Income from your salary/ main job via a W2
- 1099 income you might have earned throughout the year on any side gigs or one-off projects
- Cryptocurrency account statements
- Brokerage accounts
- Savings account that earn interest
- Any asset sales
- A list of qualifying expenses and deductions you think you qualify for with proper documentation. Contact your tax expert for a list of expenses and deductions you can take.
Taxpayers should report any income in order to avoid getting audited or acquiring debt. Questionable expenses may also lead to debt or being audited. Therefore, you should keep track of your income and expenses throughout the year in case you forget later on.
COVID-19 may also have an important effect on the 2020 tax season. As government officials are working to provide extended COVID-19 tax relief to citizens, taxpayers may be able to qualify for certain tax relief options. In order to qualify for such relief efforts, taxpayers should keep documents and proof of how they were affected by COVID-19.
Ensure Compliance Early On In Tax Season
Business owners have additional responsibilities to work on for tax season. Although taxes may not be on the top of your to do list, work on ensuring compliance early on during tax season in order to avoid any negative consequences.
Business owners should consider the following:
- Income taxes
- Employment taxes
- Self-employment taxes
- Sales tax
- Local taxes.
Employers should assess whether their employees have already filled out the new W-4 forms. Additionally, employers with contractors should ensure their contractors have turned in W-9 forms along with their 1099 forms. These tasks should be prioritized and completed as soon as possible!
Be Proactive When Conducting Research
While conducting your tax season research, be proactive and ask questions! While some individuals may not feel comfortable taking this step, it is vital for a successful tax year. Individuals retaining the services of a tax firm should especially prioritize this step in order to ensure the retained firm is reputable.
Here are some examples of things to ask your tax professional about:
- The types of receipts should you be saving
- What will happen if I hire additional employees this year?
- What if I owe back taxes and can’t pay?
A good tax professional should be able to do more than simply compile your provided documents and file your taxes. Many business owners may find themselves facing serious back taxes without the means to pay. In order to ensure the right tax professional ‘s services are retained, taxpayers should be active in voicing their comments and concerns.
The Aftermath Of Tax Season
Tax season can be overwhelming, especially with the added burden of COVID-19. However, there is a light at the end of the tunnel! The IRS is offering a multitude of debt settlement options such as their Fresh Start Initiative and is open to negotiating with taxpayers who have acquired back tax debt.
While many taxpayers are expecting a substantial refund, they should be prepared for the unexpected. Due to new tax legislation, there will likely be consequences such as a smaller refund and a surprise tax bill. In order to minimize any possible consequences, make sure you are prepared for the upcoming tax season.
If you are struggling with back tax debt owed to the state or IRS, reach out to Lifeback Tax today! Our specialty is tax resolution and we’ve helped countless clients across the nation achieve settlements with state and IRS authorities. While the best tax resolution is simply doing it right ahead of time, feel free to contact us for FREE, no obligation consultation.
Rajneet Kaur, EA, MBA, Certified Tax Resolution Specialist is the Company Director of LifeBack Tax. LifeBack Tax is a tax resolution firm based in Chatsworth, CA that specializes in determining structured solutions for clients who owe back taxes to the state or IRS. With over 16 years of experience in the industry, Rajneet and her team have been able to resolve state and IRS debts for countless clients across the nation! To get in contact with Rajneet and the LifeBack team, call (855) 605-1500 or send an e-mail to [email protected]