The simple act of paying the government with the taxes you owe, so it can continue growing the country’s infrastructure and services is converted into a complicated process with tons of numbers. Unfortunately, there are a lot of repercussions and penalties for not paying your taxes. Not paying the right amount of tax also puts you at similar risk, so you need to make sure that you’re paying exactly what’s owed. Fortunately, you don’t have to be a math whiz or an accountant to be able to file your taxes. The process may only seem complicated from the outside, but once you get to understand it properly, it’s a pretty simple process.
Here is what you should know about filing your taxes.
Gather the Required Documents
To be able to file your taxes, you need to have a few official personal forms and documents. The forms you’ll use to file your taxes are extremely important; they are standard forms that are formalized by the government. You’ll want to get W-2 from employers, and 1099 is the alternative for contractors. You may need both forms if you have both types of jobs at the same time.
The forms make it easy to know exactly how much you made last year, and the amount of taxes you’ll pay for it. To make sure your forms are complete, ensure you gather all your biggest expenses and document them in the forms, such as charity donations and education expenses. These will help you reduce the total taxes you’ll have to pay.
Avoid Getting in Trouble with the IRS
If you take too long to file your taxes, you can easily become the target of the Internal Revenue Service (IRS). The IRS has the power to usurp a portion of your wages because you haven’t paid your taxes for a while. This isn’t done suddenly; the IRS will send you multiple notices informing you that a part of your wages will be garnished if you don’t pay what you owe. You’ll get a detailed first notice that lets you know how much exactly you owe, penalties, and any other taxes you need to pay.
Review the Latest Tax Laws
A lot of regulations and tax laws can change from year to year, so it’s important to stay on top of any relevant tax law changes to avoid falling into the wrong process. Expect things like tax brackets to change often, in addition to standard deductions, personal exemption, and other important changes. There is no shortage of resources available online that can let you know about the changes, but make sure they show the latest updates.
Look for Relevant Deductions
There are thousands of things that can reward people with deductions on their taxes, in addition to tax credits. These are reductions that are worth the monetary value of certain purchases or payments, and they are more important than deductions, because they can easily slash great percentages of the required taxes. Both the American Opportunity Credit and earned income tax credit popular deductions for students and workers, respectively.
Filing your taxes is rarely ever a problem, even if you’re doing it for the first time. If you own a business, you may want to consult an accountant to help get you on the right track, or even read some of the widely available online resources. Make sure to always pay your taxes on time to avoid getting penalized by the IRS.