Tax returns were due in on July 2015, but given the circumstances, the federal government have provided a three month extension. Despite this, commentators still expect up to 1.4m to fail to provide a return, which CNBC note will result in a 5% charge and – worse – funds that could be redistributed to the taxpayer being withheld by the IRS. Taxes can be a difficult process, but with a little planning and dedication, they can be made easy. At the heart of these preparations is a simple, but crucial, concept – documents.
The basics – W2 and 1099-G
Aside from your basic details – name, address, social security – the absolute must-have document, supported by evidence throughout the year, is the W2 (for employed people) and the 1099-G (for unemployed people). While these change in need from case to case, and self-employed professions will require further evidence, they do provide the basis for income assessments. When you receive this form from your employer, or start filling it out yourself as a self-employed person, use your time to diligently check for errors. According to US News, the correction process when amending these forms can be time-consuming and costly for both the IRS and taxpayer – get it right first time.
Keep a thought for any income you have made through non-formal employment. This can include hobbies, online selling and gambling. To take the latter, Investopedia outline how gambling income can be taxed – anything over $1,200 should be issued a form when paid out by the casino in question. If not, the gambler must still report everything to the IRS. Keep an eye out for these small sums which, over time, can add up to a notable untaxed pot. It will improve the accuracy of your report and keep you out of the radar of IRS investigators, ultimately leading to your tax affairs being in order and timely.
Securing your dues
Aside from the legal requirement to fill out tax returns, the process of tax assessment can provide substantial savings. Deductions can range from K-12 educator expenses and charitable donations through to federally declared disaster rebates and home improvements for energy savings subsidies. Essentially, there is a huge range of things you can undertake in daily life that the government will allow you a refund for. The best way to keep organized here is to keep documents concerning any changes or purchases you make to support the home or business; when compared against the rebate text and criteria, you may be owed costs that you would not have picked up on otherwise. There is no law against making the request in good faith, even if the IRS deny it.
Careful management of your tax affairs is crucial to your long-term financial health and can, indeed, have an impact on your mental and physical health. Having thorough documentation to support your tax process is key in this. Keep your documents; make yourself aware of your rights; and be timely in your filing process.