Tax comes around each and every year, and there is nothing you can do to stop it. That is the bad news. Fortunately, by following a few simple steps and planning, you can ensure the process goes smoothly and is completed on time.
Importance Of Preparation
Everyone that earns money in the United States is required to pay federal taxes. This is the government’s way of ensuring that everyone contributes their fair share to the overall society. Unfortunately, most people will have to pay federal taxes at the same time each year, and the IRS doesn’t take any excuse. Therefore, it is vital to get things ready when tax season rolls around so that you are not caught off guard, resulting in late filing and potential penalties.
An e-file tax is a tax you pay when filing your taxes electronically. Because you can file online, e-filing can often be the easiest and least expensive way to process your tax returns. You can e-file your taxes with a company like Intuit, and you’ll be able to complete your entire return in just a few minutes. Some of the main benefits of this method include:
There Are Fewer Mistakes
Approximately 20 percent of income tax returns on paper are inaccurate, whether due to omitted information or incorrectly calculated taxes; half of these errors lead to overpaid taxes. However, fewer than one percent of electronic returns contain errors. An IRS error report can be sent back in as little as 48 hours if a mistake is discovered on your return so that you can fix the problem as soon as possible. You’ll save a lot of time this way and can even keep you from receiving a dreaded audit for wrong information.
Refunds Processed Faster
The refund process for returns sent through the mail takes up to six weeks. E-filing your return and electing to have your refund deposited directly into your bank account is the most efficient way to get your money as soon as possible. It isn’t often the IRS will pay you back so quickly, so you should grab the opportunity when it is there.
More Efficient Preparation
If you tackle the job with the help of your computer, it will be easier for you. Furthermore, you’ll save time and money by filing online. Another benefit is that most things are online these days to have quick access to receipts and invoices directly from your computer.
Don’t Forget Property Tax
Property tax is the money you have to pay each year to the city/county/town/township to pay for police and parks and the services you use. The property owner pays this tax, which the local government calculates where the property is located. A property tax is typically assessed based on the value of the land and other assets owned by the owner. This tax is paid to the state, and each state will have different rules in place. For instance, when paying property tax in Texas, you must meet the deadline of January 31st. If you don’t prepare, you could find yourself with fines that add up over time. If you find yourself struggling with this tax, you can get specialist loans out to aid you in not becoming a victim of overdue tax fines. The tax specialists over at Texas property tax loan pros point out that the state can encumber your property with a lien if you are overdue. This can eventually result in foreclosure if the debt remains outstanding for too long. Therefore, you must keep this pax in mind when filing so that you don’t end up losing your home and with some simple preparation, you can avoid a lien and remove the associated stress associated with the risk of losing your property.
Think About Deductions
Deductions reduce your tax liability by lowering taxable income. Tax deductions lower your taxable income as they are subtracted from your earnings. There are many kinds of tax deductions that you can take on your tax return. Some tax deductions for individuals and families include:
- Charitable Contribution Deduction: This benefit allows taxpayers to claim a charitable contribution deduction for contributions made to qualified organizations. An eligible philanthropic gift is a distribution of cash, property, or services that are made to benefit the public.
- Student Loan Interest Deduction: Interest on a student loan is tax-deductible, and the IRS does require you to pay taxes on this income. The deduction is based on the current interest rate to which you are paying back your student loans. The formula for this deduction is as follows: Interest on student loan x Rate of interest = Amount of Interest Deductible.
- Child And Dependent Care: A Child and Dependent Care deduction is a tax-deductible amount that you can use to cover children’s living expenses in your care. If you have dependent children, then this is a deduction that you will be able to claim on your tax return. There are two types of dependent children: dependent children or qualifying children.
- Child Tax Credit: The Child Tax Credit is a federal tax credit available to parents of children under age 17. The amount of money claimed by parents depends on their tax situation. Still, in general, the amount of the credit is based on the number of qualifying children under age 17.
- Earned Income Tax Credit: This is a tax credit for low-income working families to help reduce their income tax liability. As the name suggests, it is earned by working and is available only to people who file a tax return.
Get Your Documentation In Order
The federal government is a beast of a bureaucracy. It can be confusing to figure out how to navigate the system and find the correct forms for your particular situation. Even if you go down the e-filing route, you will still need to prepare everything in advance to ensure the process goes smoothly. From finding the correct documents to going through all of your receipts and bills for the year, you will have to find everything relevant. The best course of action is to keep everything organized throughout the year. You can even use software and apps to keep paperwork digitally archived, saving you time and hassle when the date comes around.
Tax is never a fun thing to have to do, but it is necessary. Keeping things organized and remembering to claim deductions you are due will make the process much more manageable.