Avoiding Hiccups When Filing Your Taxes

Taxes are the backbone of the financial structure of any country, filing them properly is taken very seriously. You may spend a good couple of weeks trying to meticulously calculate your taxes to avoid any problems with the IRS, only to find a warning notice in the mailbox. Learning about the right methods of filing taxes has a learning curve, and it may seem very complex at the start but once you get the hang of it, it gets much easier. Not all taxes are the same; some can take a lot of time to calculate because of the many variables involved while others are simple and straightforward. While making a few mistakes while filing taxes shouldn’t instantly get you in trouble, but if you keep piling them on, it won’t be pretty. Here are a few tips that you can use to avoid the most common hiccups when filing your taxes.

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Paying for Taxes Once

Being double-taxed is one of the nightmares of many investors and shareholders. Sometimes, your income is taxed twice. This process is known as double taxation and it’s mainly done in corporate tax filings. The corporate dividends that you receive are taxed as corporate profit, and then you’re taxed again when you receive those dividends because they’re considered an income or salary. This can be avoided if the corporation avoids paying dividends and replace it with shares or through the restructuring of the company.

Stay Updated

You may have a lot of knowledge about filing taxes because of your experience or research, but it’s impossible to put this knowledge to good use if you don’t keep up with the news. Every year usually brings along a set of new and reformed tax laws that will probably affect the tax filing process. You should either keep up with the latest tax news or use software that can provide you with automatic and updated forms.

Use the Right Calculations

Taxes involve a lot of math, and that’s why most people disdain the thought of doing it themselves. If you’re not in a position to hire an accountant to do all your taxes, then you should start learning how to calculate data in the most accurate way possible. Never round numbers up or down. Instead, use the exact numbers you see on your forms, whether it’s a W-2, 1099, or other. Even a difference of a few dollars caused by the rounding of numbers is considered a red flag to the IRS.

Remember that Almost All Income is Taxed

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While a 1099-MISC form is provided by most companies that use freelancers or contractors, you shouldn’t depend on it as the only way to keep an eye on your income. Almost all streams of your income are taxed, and this isn’t usually understood by many taxpayers. If you’re paid less than $600 on a certain job, you won’t receive a 1099-MISC form but you’ll still be required to report your income accurately.

Taxes don’t have to be a nightmare, even if you’re a beginner. The complexity of taxes arises from not taking the time to understand how it works on a basic level. You need to make sure that you invest as much time as required to fully understand what’s needed from you; if needed, try consulting a friendly accountant or tax lawyer.

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