How to Prepare for Tax Season by Following These 3 Steps and Avoid Tax Trouble. Talking about taxes is not one topic people are happy to discuss or even care to think about, especially if they end up owing money in back taxes every year. That’s why many taxpayers wait until the very last moment to prepare for tax season. It’s also why nearly 14 million Americans find themselves receiving threatening letters from the IRS and in some collection proceedings.
With the new Biden administration taking office in 2021, more tax changes are almost certain. COVID relief is another factor to keep in mind, and things are changing almost daily. So, it’s never too early to start preparing for your tax filing.
To help you minimize a potential tax problem, we wrote this article. Here are three simple steps to start preparing for tax season.
Note: If you already have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief, file years of unfiled tax returns, and sometimes settle their tax debt for a fraction of what’s owed. Contact us at 772-337-1040.
With that said, let’s jump into the article on how to prepare for tax season.
1. Get Your Paperwork Organized
If you’re rushing around at the last minute to find all of the paperwork you need to file your taxes, you’re making tax season harder on yourself than it needs to be.
Start organizing all of the financial information you may need to file your taxes. It’s best to do this throughout the year rather than at the last minute to ensure that you don’t miss anything.
We suggest making a checklist of all the documents you’ll need to gather. Such as:
● 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 statement
● Brokerage accounts
● Savings accounts that earn interest
● Did you rent or sell any real estate
● 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.
● Make sure you tell your tax advisor how much you received in each of the two stimulus payments.
Failing to report income or having questionable expenses are two of the biggest pitfalls we see with taxpayers who find themselves in tax debt or getting audited. Make sure you have documentation for everything.
COVID is changing things for this tax season. Make sure to document your financial situation and how it was affected by COVID. This could lead you to find tax relief as things continue to evolve in 2021.
2. If You Are A Small Business Owner Evaluate Your Tax Obligations, Filings, and Compliance
If you are a small business owner, it’s essential to start working on your tax liability management early on. You’re likely bouncing a lot of balls, and taxes are likely on the backburner, yet there are so many little things that can fall through the cracks. At this time, you should also consider income taxes, employment taxes, self-employment taxes, sales tax, and local taxes.
You should have already had your employees fill out new W-4 forms and have all your contractors turn in their W-9’s so you can provide them with 1099’s, but there’s a chance they may not have turned them in yet. Ensure that this is taken care of as early as possible.
If you find yourself behind on your payroll taxes or other business tax problems, contact our firm now at 877-355-8010 or book your appointment online. We help business owners negotiate with the IRS or state and find tax relief.
3. Ask Questions and Be Proactive
This step is important, yet you may not feel comfortable doing it. It’s essential to ask these basic questions from your tax professional.
- What 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?
Your tax professional should do more than take the information you provide and file your taxes. If you owe back taxes and know you won’t be able to pay, and if your tax professional doesn’t have good answers, it could be time to consult a professional tax relief firm like ours.
A tax relief firm like ours has years of experience helping taxpayers, just like you resolve IRS and State tax problems and negotiating the best deal on your behalf. If you owe the IRS money for 2020 or prior years, contact us now for a consultation to learn about your options.
The good news is the IRS has several debt settlement options under their Fresh Start Initiative and is generally willing to settle with taxpayers who have been blindsided by a surprise tax bill and can’t pay it off in full.
Hopefully, tax filing season will bring you the big refund you are hoping for. However, it is important to be prepared for the unexpected. The new tax bill has unleashed a host of unintended consequences, including smaller refunds and surprise tax bills. By being prepared, you can reduce the pain of a surprise tax bill so that you can get on with the rest of your life.