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Tax Preparation 101: Are You Ready for Tax Season?

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Tax preparation is incredibly important as tax season approaches. Sadly, roughly 40% of individuals wait until April to begin gathering the necessary documents and information that are required to file one’s taxes.

Even if you are a business owner, proper tax filing preparation is a must.

When you prepare adequately, you’ll have an easier time filing your taxes and you’ll avoid many common IRS and tax-related issues.

Here are some key points to remember as you get organized and begin preparing for tax season this year.

Collect the Proper Tax Forms

Whether you’re filing an individual or business tax return, the IRS requires specific tax forms for certain situations. If you’re not sure which tax forms to use, the IRS has resources you can take advantage of or you can call a tax preparation service expert.

Common forms to collect include W-2 tax forms for you and your spouse, 1099 investment income forms, forms related to taxable alimony received, SSA-1099 forms for Social Security benefits, forms related to rental property income and expenses, and form 6252 for principal interest collected during the year, just to name a few.

Keep Your Receipts

When getting ready for tax season, it helps to store all of your receipts in the same place. Keep a box in your home or office and keep accurate records. If you lose any important receipts, you could end up paying big.

If you haven’t been collecting your receipts, there’s no better time to start. It’s best to start gathering your important receipts now than to scramble at the last minute come tax time.

While having all of your receipts handy isn’t necessary for standard IRS tax returns, you will want to have a cache of receipts if you ever get audited.

Keep Your Previous Tax Returns Easily Retrievable

You never know when you might need to reference a tax return form from the past few years. Keep those returns handy, particularly if you plan to work with a tax preparation expert. Whether you keep your IRS forms in a desk drawer, filing cabinet, or a shoebox on a high shelf, you’ll thank yourself later, when one of these forms becomes necessary and it’s always within easy reach.

Do You Need to File an Extension?

If you haven’t been preparing for tax season and you’re only getting started now, you may need to give the IRS a head’s up. Filing a tax extension allows you to file later in the year. This ideal for you if you hope to work with a tax professional, as those accountants and payroll experts will be less busy during those off-times of the year. When your tax professional isn’t so busy filing taxes for other individuals and businesses, you’ll find yourself filing in less time.

Review or Revise Your W-4 Tax Forms

Go over your W-4 and determine if you’ve experienced any life changes that may affect your taxes. These include employment bonuses, job changes, buying or selling a home, getting married or divorced, going to school, retiring, giving or receiving gifts, receiving an inheritance, real estate planning, and casualty and loss deductions.

Ask your employer if you can review and revise your W-4, as the IRS actually recommends that you do this on a yearly basis.

Remain Informed

As you prepare for tax season, you have an important decision to make. Are you going to file your taxes on your own or are you going to trust a tax preparation service? If you are going to file on your own, ensure that you research all appropriate tax laws and regulations on a regular basis. Tax regulations are constantly evolving and that means that not being educated can cost you money or keep you from receiving important deductions.

Deciding to work with a tax preparation service professional can save you money in the long run. Tax professionals keep up with the proper laws and have the expertise to uncover relevant deductions that can save you money while putting you in good standing with the IRS.

Check for Adjustments to Your Income

You can reduce the amount of income that is taxed by checking for various adjustments to your income. This can increase your tax refund and lower the amount you owe.

These adjustments to your income may include IRA contributions, energy credits, medical savings account (MSA) contributions, student loan interest, moving expenses, self-employment health insurance payments, alimony payments, and educator expenses.

Assess Your Deductions

If you’re not working with a tax professional, it will be up to you to check for all appropriate deductions. This is another good time to check for important life changes, like having a child or becoming disabled. Ensure you research all possible deductions so that you never overpay on your taxes.

Common deductions include child tax credits, child care costs, education costs, adoption costs, investment interest expenses, home mortgage interest, medical and dental expenses, and more.

Will You Choose Itemized or Standard Deductions?

Depending on your unique tax situation, you may need to do itemized deductions. This means that you get credits for everything you have spent. The alternative is to take the standard deduction that is dictated by your filing status. If you’re unsure which type of tax preparation status you should choose, consult with a tax plan expert who can readily assist you.

Have You Considered Bunching Your Deductions?

If you don’t have enough deductions for itemized deductions, you can bunch your deductions by pushing deductible expenses into a single calendar year. This allows you to surpass the threshold for non-standard deductions status depending on your filing status.

Are There Any Charitable Donations?

If you have made any donations to charities or non-profit groups, these expenses are considered to be tax-deductible. Whether you have monthly donations or one-off gifts, ensure that you track every cent so that you can deduct these expenses from your taxes.

Review Your Filing Status

Your filing status can affect how much you owe in taxes this upcoming tax season. In some cases, your tax filing status will dictate that you don’t have to file at all.

For instance, if you are single but you’re planning on marrying later in the year, you may choose to file jointly or separately, depending on your unique situation.

Maximize Your Retirement Plan Contributions

By maxing out any retirement plan contributions, you can effectively reduce your taxable income, which will, in turn, reduce your tax bill. If you can’t afford the maximum amount, you can at least attempt to match any employer contributions. That’s because employer contributions essentially represent immediate returns on your money, as all of the funds are tax-deferred. Furthermore, these contributions grow tax-free.

Plan Out How to Spend Your Tax Refund

If you receive a tax refund, it can be easy to spend all that money quickly. Instead, create a plan so that your money stretches much further. For instance, do you have significant debt that could be paid off? A big check from the IRS could help put a dent in those liabilities, which in turn can improve your credit score.

Of course, you don’t have to spend your refund at all. You could put the money away for a rainy day, such as for medical or automobile emergencies.

A tax and accounting professional can also help you adequately plan how to spend your refund so that you remain in good standing with the IRS and put your best foot forward financially.

Are You Ready to Work with a Tax Preparation Service Professional?

According to the federal government, 60% of individuals use tax preparation experts to complete and submit their IRS tax forms. This may be the best-case scenario if you don’t have the time or inclination to keep up with the latest tax laws, and you want to ensure that your taxes are always filed appropriately and on time.

Call for All Tax Problems, Questions or Concerns

SCL Tax Services is open all year round to help you with your tax-related questions and concerns. During tax season, our office is open on Saturdays from 10 am to 6 pm and Sundays from 12 pm to 3 pm.

However, no matter what time of year it is, call and schedule a free consultation with one of our tax preparation experts. We can guide your preparation efforts and help you file with the IRS so that you remain in good standing.

If you have IRS back taxes or other tax-related problems, we can help with those also. We are known for helping our clients find important deductions, select the proper filing status, and plan for common life events.

If you are an individual or business owner who has yet to prepare for tax season, there’s no better time than right now. Call today for a free consultation and we’ll get you ready for this and every subsequent tax season.

Upcoming Tax Deadlines

September

Th 15 Pay the third installment of your 2016 estimated tax – Use Form 1040-ES.

Th 15 Partnerships: File Form 1065 if you timely requested a 5-month extension.

Th 15 Corporations: File calendar year Form 1120 or 1120S if you timely requested a 6-month extension.

Th 15 Corporations: Deposit the third installment of your 2016 estimated tax.

Fr 30 File Form 730 and pay tax on wagers accepted during August.

Fr 30 File Form 2290 and pay the tax for vehicles first used during August.

October

Mo 17 File Form 5500 if you timely requested an extension on Form 5558.

Mo 17 Individuals: File Form 1040, 1040A, or 1040EZ if you timely requested a 6-month extension.

Mo 17 Electing Large Partnerships: File Form 1065-B if you timely requested a 6-month extension.

Mo 31 File Form 720 for the third quarter.

Mo 31 File Form 730 and pay tax on wagers accepted during September.

Mo 31 File Form 2290 and pay the tax for vehicles first used during September.

Mo 31 File Form 941 for the third quarter.

Mo 31 Deposit FUTA owed through Sep if more than $500.

November

Th 10 File Form 941 for the third quarter if you timely deposited all required payments.

We 30 File Form 730 and pay tax on wagers accepted during October.

We 30 File Form 2290 and pay the tax for vehicles first used during October.

Tax Relief to Louisiana Storm Victims

Louisiana storm victims will have until Jan. 17, 2017, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today. All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief.

Following this week’s disaster declaration for individual assistance issued by the Federal Emergency Management Agency (FEMA), the IRS said that affected taxpayers in East Baton Rouge, Livingston, St. Helena and Tangipahoa parishes will receive this and other special tax relief. Other locations in Louisiana and other states may be added in coming days, based on damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 11, 2016. As a result, affected individuals and businesses will have until Jan. 17, 2017 to file returns and pay any taxes that were originally due during this period. This includes the Sept. 15 deadline for making quarterly estimated tax payments. For individual tax filers, it also includes 2015 income tax returns that received a tax-filing extension until Oct. 17, 2016. The IRS noted, however, that because tax payments related to these 2015 returns were originally due on April 18, 2016, they are not eligible for this relief. A variety of business tax deadlines are also affected including the Sept. 15 deadline for corporation and partnership returns on extension and the Oct. 31 deadline for quarterly payroll and excise tax returns.

In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after Aug. 11 and before Aug. 26 if the deposits are made by Aug. 26, 2016.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer can seek to have the penalty abated.

New Factors Increase Importance of Withholding Check-Up

There are several new factors that could affect refunds in 2017. A new tax law change requires the IRS to hold refunds a few weeks for some early filers in 2017 claiming the Earned Income Tax Credit and the Additional Child Tax Credit. In addition, the IRS and state tax administrators continue to strengthen identity theft and refund fraud protections, which means some tax returns could again face additional review time next year to protect against fraud. Taking a closer look at the taxes being withheld can help ensure the right amount is withheld, either for tax refund purposes or to avoid an unexpected tax bill next year.

By adjusting the Form W-4 (the form employers use to figure the amount of federal income tax to be withheld from pay), you can ensure that the right amount is taken out of your pay throughout the year so that you don’t pay too much tax and have to wait until you file their tax return to get a refund (if applicable).

IRS Warns of Back-to-School Scams

The IRS is warning against telephone scammers targeting students and parents during the back-to-school season and demanding payments for non-existent taxes, such as the “Federal Student Tax.”

People should be on the lookout for IRS impersonators calling students and demanding that they wire money immediately to pay a fake “federal student tax.” If the person does not comply, the scammer becomes aggressive and threatens to report the student to the police to be arrested. As schools around the nation prepare to re-open, it is important for taxpayers to be particularly aware of this scheme going after students and parents.

 

Scammers are constantly identifying new tactics to carry out their crimes in new and unsuspecting ways. This year, the IRS has seen scammers use a variety of schemes to fool taxpayers into paying money or giving up personal information. Some of these include:

  • Altering the caller ID on incoming phone calls in a “spoofing” attempt to make it seem like the IRS, the local police or another agency is calling.
  • Imitating software providers to trick tax professionals — see IR-2016-103.
  • Demanding fake tax payments using iTunes gift cards — see IR-2016-99.
  • Soliciting W-2 information from payroll and human resources professionals — see IR-2016-34.
  • “Verifying” tax return information over the phone — see IR-2016-40.
  • Pretending to be from the tax preparation industry — see IR-2016-28.

If you receive an unexpected call from someone claiming to be from the IRS, here are some of the telltale signs to help protect yourself.

The IRS will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Ask for credit or debit card numbers over the phone.

If you get a suspicious phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

  • Do not give out any information. Hang up immediately.
  • Search the web for telephone numbers scammers leave in your voicemail asking you to call back. Some of the phone numbers may be published online and linked to criminal activity.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
  • If you think you might owe taxes, call the IRS directly at 800-829-1040.