A nation gets built by responsible citizens who pay taxes. The money we pay in taxes aid in many places. It helps in the payment of government workers’ salaries, supporting common resources, and maintaining infrastructure to keep us safe. So, just like tipping that waiter in a restaurant, paying taxes will also improve someone’s life. However, when tax time comes up, high diligence comes in handy to avoid IRS scrutiny. So here are tax tips that you need to know.
Monitor your spending
Spending money is inevitable. So, you can use an excel sheet or a software package that can help keep track of all your business expenses. Ensure you record all expenses such as phone service, work supplies, and professional memberships, among others.
Also, it is vital to keep up all the receipts of your spending. This may help when IRS raises questions on whether you indicated the true value of any product or service you got. We can advise you to get a file for all your receipts and indicate all categories for easy access.
File returns even if you can’t afford to pay your taxes
Failure to pay your tax or file your returns will attract penalties. Ensure you file your returns even if you are in a tight spot financially. The act can help reduce the hit on your finances when you get in a position to clear up. Also, there is an option to pay with a credit card. Alternatively, you can make a payment plan with IRS if you can’t afford to pay the tax bill on tax day.
Applying for an Offer in Compromise
Offer in Compromise program is an agreement made between the taxpayer and the government or IRS. In the agreement, if accepted, the applicant will have to pay less money than his tax debt.
Applying for an OIC will entail disclosing all your income. You will also open up on your financial assets and items that lead to acceptance or denial of the offer of compromise.
You can get the best help creating an offer in compromise from consultants who are good negotiators. They can make it easier for anyone to get acceptance. It will be easier to get an OIC if you have filled all your tax returns and made all needed tax estimates for the year. Also, you must have paid up all your federal tax deposits for the present quarter.
Additional opportunity to lessen your tax bill
If the end year passes before paying up your tax bill, there is no need to get worried. There is an additional opportunity to reduce debt by utilizing tax breaks. One helpful opportunity comes when funding your individual retirement account.
Here you can pay to the retirement account on the year you are filling and make payment for the previous unpaid year. You will have to inform your financial advisor to ensure the previous year’s contribution is coded appropriately.
Go through your paycheck keenly
The tax cuts and jobs act was passed in December 2017 but took IRS sometime before revising withholding tables. We, therefore, urge you to counter-check your paycheck to see the withholding amount for this year.
If there is no enough tax withheld in your paycheck, you will owe the state when tax time comes. However, if too much tax is being withheld in your paycheck, be sure to get a refund. You can use an IRS tax withholding estimator if you are unsure if the amount being withheld in your paycheck is the correct one.
Use the estimator if you run two-income families or you have double or more jobs. We also urge people with children who ask for credits and older dependents to use the IRS tax estimator.
Finally, remember that individuals who fail to file returns owe Uncle Sam taxes. Equivalently, those who don’t pay taxes on time increase chances of getting hefty penalties and lose their assets through seizure by IRS. Always be alert to reply letters sent to you by IRS to avoid the risk of losses.
If you have been having a great year by recovering from financial constraints or you are currently besieged to get on your fit, you can use the above tips to save a dollar on your taxes as you make the accurate moves before the tax season closes.