How Do I Know What I Owe?
Knowing exactly what you owe the IRS is the first step to filing your tax returns.
Tax brackets and their applicable tax rates have changed over the years. Make sure you refer to your applicable tax brackets based on the nature of your income and the total income you made during 2020. Most Americans are W-2 income earners who pay regular income taxes. The IRS has updated marginal tax rates for 2021.
If your income comes from business activities, self-employment, capital gains, or others, refer to the relevant tax brackets for your income sources.
Finding out what you owe may take some time. You’ll also want to double-check and make sure your calculations are correct. Claiming the wrong tax liability or refunds will lead to consequences that are best avoided.
Many people choose to go to tax professionals for their income tax returns. Getting a professional tax relief check with the best tax relief companies is cheap and efficient.
Which Documents would you need to file your taxes?
No matter how you calculate your taxes, you will need several documents for your filing.
You will need your W-2 form, which states how much income you made for the last tax year. The 1099 form goes over all people or entities who are not your employer that have given you income. Rental property income is one such example.
When you’re filing, you will need documents that cover each declaration. So, gather your:
- Contributions to your retirement account
- Mortgage interest
- Property taxes
- Charity donations
- Local and state taxes already paid
- Expenses for education
- Unreimbursed medical bills
- Your state and federal tax returns for last year
How Can You File Your Taxes?
You can file your taxes ahead of the tax filing deadline by filling out your 1040 either by hand or online. If you do it by hand, you will need to mail it to the IRS. This is a less common method during the digital age. You can either file your taxes online or hire a company to do it for you.
Mailing in handwritten forms is a thing of the past and there are a few different things that could go wrong, which is why this option is best avoided. Many people use tax software and prefer to file their taxes online. They will be sure that the tax filing reached its final destination and did not get lost in the mail.
Lastly, you can hire qualified professionals to complete your tax filing on your behalf. You can find qualified professionals at the best tax relief companies.
What Is The COVID-19 Extension?
The COVID-19 extension has pushed the tax filing deadline from April 15th to July 15th for 2020. For 2021, the deadline was pushed to July 15th. However, you still need to pay your taxes by April 15th. Those who requested an extension for their 2020 tax returns have until October 15th to file.
You would file for the extension with IRS Form 4868. If you did not file the 4868 form on time, you need to file by the original deadline or risk IRS penalties. If you did file the form, you have 3 more months (October 15th) to file your taxes.
What Happens If You Miss The Deadline?
If you miss the tax deadline, you will have to pay interest on your tax bill. REMEMBER, the tax extension gives you more time to file your taxes, but not more time to pay them. The typical interest for late payments is 0.5% per month after the April 15th deadline. The typical penalty for late filing is 5% of the due amount per month. The maximum penalty you can face is 25%. The IRS expects you to pay 90% or more of your tax liability by April 15th. If you’ve already missed a deadline, it’s important to act fast. Try speaking to a tax professional about your options
How Can I Make Sure My Taxes Are Filed Properly?
Filing taxes can be stressful, but it’s necessary to handle them promptly. Keep these tips in mind to ensure everything is taken care of.
It is vital that you double-check all aspects of your tax obligations. This includes making sure that you are aware of the correct tax return dates in 2020, making sure that you have claimed all available tax credits and that you are taking all of the deductions you are entitled to. This is one area where tax companies will make sure you’ve done everything right. They will use their professional knowledge and tools to ensure every cent is properly accounted for.
Retirement contributions can reduce your taxable income for the given tax year. The allowable size of contributions also changes year-by-year, however. For 2020, the limits rose to $19,500 and $6,500 for catchup contributions. The best tax relief companies will also help you ensure you use your retirement contributions in the most efficient way possible. That might not mean maximizing your contributions. But it does typically mean making as big a contribution as reasonably possible.
When the tax deadline is fast-approaching, some people want to prey on peoples’ tax-related fears. People will receive emails and calls from people claiming to be the IRS. These scam artists will normally try to scare you into making rash decisions that cost you. Remember, the IRS will only correspond with you by mail. Ignore attempts to scare you into quickly sending someone your hard-earned money.
When it comes to outsourcing your tax filing tasks, avoid people making grandiose claims. If they’re promising to secure you a huge IRS refund, they might just end up getting you in more trouble with the IRS. Stick to the best and most reputable tax companies.
Claiming All Applicable Deductions
You should take some extra time to make sure that you are claiming all the available deductions. You might not realize that there are some deductions you can claim for certain expenses, such as charitable contributions. You can also deduct education expenses, mortgage interest and medical costs are other possible deductions that you should not forget about. Make sure when claiming deductions that you keep all of the relevant receipts and records in case you are audited. The best tax return companies will often make you aware of the common deductions that people forget about.
When it comes to taxes, it’s always better to be prepared. You need to be aware of all your obligations and deadlines in advance. The IRS doesn’t take kindly to indiscretions and they will penalize you if you miss their deadlines. Making mistakes with the IRS has led many businesses and individuals to ruin. To make sure everything is prepared properly, it pays to hire a good tax professional. The tax professionals at the best tax services companies will make sure everything is filed properly. They can also catch the discrepancies and deductions you might have missed. With their professional input, you can save money by having tax exemptions, credits, and deductions that you can claim pointed out to you.