An incorrect tax return can cause penalties in unpaid balance or incur additional taxes. You must use caution when filing taxes or choosing a tax professional because, according to the IRS, the taxpayer is ultimately responsible for their paperwork. Being proactive with your tax obligations can reduce your taxable income and mitigate the chances of being penalized.
Whether you use a tax professional or file taxes on your own, here are five things you must consider before filing your taxes:
File a return even if you can’t pay your tax bill
There are penalties, both for failure to file a return and failure to pay your tax. You must file your return even if you can’t pay your entire tax bill by the due date.
To get an extension to pay your tax bill:
- Pay it using your credit card
- Enter into an installment agreement with IRS if you owe $50,000 or less in combined individual income tax, penalties, and interest
- Re-finance your home
- Consider an Offer in Compromise (OIC)
- Make a partial payment
File electronically
IRS urges taxpayers to file their taxes online as it can save trees, time, and money. It’s quick, convenient, and secure. E-filing also speeds up the process of a tax refund if you’re eligible for it. However, you do have to necessarily file a paper return in the following scenarios:
- You need to file an amended return (Form 1040X).
- You’re seeking relief as an injured spouse (Form 8379).
- Your e-filed return keeps getting rejected.
- If you live or work outside the U.S.
Itemize your deductions to save on taxes
a. Take the standard deduction. If your taxes are simple, you can quickly get the deductions you deserve. You can use the standard deduction, which reduces the income amount on which your tax is calculated.
b. Itemize your deductions. If the sum of all your deductions is greater than the standard amount, you must itemize your deductions. List out each deduction you qualify for, like large charitable donations, medical expenses, and mortgage interest payments.
Choosing between standard and itemized deductions is a question of money and time. You must take the time to itemize all deductions if you can save hundreds or thousands of dollars in taxes. You can also choose to take standard deductions, which will save your time with no financial benefit.
Request an automatic extension
IRS will penalize you for not filing your tax return by Tax Day. However, you can request an automatic extension in one of the following ways:
- File online for free using FreeFile on IRS.gov
- File electronically
- File through federal form 4868
However, you must remember that an extension to file is not an extension of time to pay your tax bill. So, if you can’t pay the total tax before Tax Day, ensure that you file your taxes on time and get a timely extension.
About Hoshi CPA, LLC
If you want to itemize deductions or avoid penalties, Hoshi CPA, LLC should be your one-stop destination. Udai Hoshi assists individuals, Japanese-speaking communities, and U.S. business owners with tax planning, tax compliance, tax resolution, and CFO professional services. Hire our services if you are seeking professional CPA firms in Oregon. You can talk to him for a tax consultation by booking a quick call, strategy session, consulting, or a CFO strategy session. You can call us at (503) 388-6580 or drop an email at staff@hoshicpa.com to know more.
