Knowing a little about the tax process can make filing your taxes easier for yourself. So, keep these six points in mind when you’re preparing to file your taxes this year.
The Different Types of Taxes
There are several different types of taxes that people must pay. It includes income, capital gains, Social Security, Medicare, and self-employment tax, the most common. Each one has its own unique set of rules and regulations. Therefore, being familiar with them is essential to stay compliant and avoid penalties.
What is a Tax Bracket
You’ve probably heard the term “tax bracket,” but what does it mean? Your tax bracket is the income range taxed at a specific rate—the higher your income, the higher your tax bracket.
For example, in the United States, individuals are taxed at 10% to 39.6% depending on their income. That means anyone earning income within that 10-15% range will pay 10% in taxes, while anyone earning income within the 33-35% range will pay 33% in taxes.
Knowing your tax bracket can assist you in planning for your financial future. For example, if you know you’ll be moving into a higher tax bracket next year, you may consider delaying your retirement savings contributions until later.
How to File Your Taxes
The best way to file your taxes is to use tax preparation software. It will help ensure that you’re filing correctly and taking advantage of every deduction and credit you’re eligible for. When looking for tax preparation software, it’s essential to find one that is reputable and endorsed by the IRS.
Once you’ve chosen software, it’s imperative to read the instructions carefully and follow them step-by-step. It will help ensure that your return is filed correctly and without errors.
What if You Can’t Pay Your Taxes?
If you cannot afford to pay your taxes, don’t panic. Just because you can’t pay your taxes today doesn’t mean you will be arrested or face legal consequences. The IRS has several programs specifically to help taxpayers struggling to pay their taxes.
There are a few distinctive choices available, so it’s essential to contact the IRS as soon as possible to discuss your options. The most common program is an installment agreement, which allows you to make monthly payments toward your tax debt.
There are also a few programs accessible for those who owe back taxes and cannot make a payment. The Fresh Start Program, for example, allows taxpayers to get caught up on their taxes over time without any penalties or fees.
What are some potential Penalties for Not Filing Taxes?
The penalties for not filing your taxes can be significant. For example, you could be charged a penalty for filing late, and if you owe taxes, you could also be charged a penalty for not paying on time. Sometimes, you could even be obliged to pay interest on the money you owe.
It’s always best to file your taxes timely, even if you think you might not have enough money to pay what you owe. It is because the penalties for not filing can be much higher than those for paying late. Plus, the IRS is more likely to work with you if you’re proactive and let them know you’re having trouble paying your taxes.
If you have difficulty clearing off your taxes, contact the IRS to discuss your options. There are often ways to work out a payment plan or develop a solution that works for everyone involved.
How to Get Tax Help
If you’re feeling overwhelmed and don’t know where to start, don’t worry. There are many ways available to help you out. The IRS has a great website with all the necessary information and a helpful guide on filing your taxes.
Multiple tax professionals can help you prepare your return and answer any questions you may have. Don’t be afraid to ask for help – the sooner you start, the quicker you can get your taxes done and out of the way.
Furthermore, it’s fundamental to understand that there are excellent benefits to filing your taxes on time, even if you don’t have all the necessary information. When you file on time, you avoid penalties and interest, and you may even be able to receive a refund sooner.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
