You’ve got a business or a job. You’ve been making money and paying taxes for a few years. But, do you really know what you’re doing when it’s time to file? According to irs.gov , more than 155 million people will file tax returns this year, and approximately 70 percent of those folks will receive a refund—the verdict is out on whether that’s good or bad. Then there are always those who’ve made perfect calculations with their deductions and will break even (this is a preferred method for some because a refund check actually means you’ve been overpaying the government). Then, there’s that other batch, the individuals who will owe. Be clear: IRS debt is not a rich or six-figure earner issue. You can end up owing money in any income bracket, so it’s up to you to be on top of your deductions. If you’ve been delaying getting your taxes done, it’s time to stop running. Be ready.
CASSIUS asked Ash Cash, personal finance expert and author of Mind Right, Money Right: 10 Laws of Financial Freedom, and The Wake-up Call: Financial Inspiration Learned from 4:44, to offer some insight on what folks should know. Here are five tips that will ensure you’re on the up and up when it’s time to file.
1 Do Get Your Stuff In Order
Before you even think of processing your taxes, there are some important steps you need to make. Gather all the income you made this year— income includes any forgiven debt, cash prizes, and gifts. If you had a giving heart over the last 12 months, gather information on the money you’ve donated. Itemizing what came in and out over the course of 2020 is a major must.
2 Don’t Skimp on Paying a Pro
With so many advertisements about the ease of using tax preparation software, it may seem savvy to file on your own. Despite the lure, experts will be more accurate because it is their job to know the intricacies of your state and federal law. Consider hiring a C.P.A (Certified Public Accountant) or a licensed tax professional to get the job done right.
3 Do Your Due Diligence
If hiring a tax pro really isn’t in your budget, make sure you dedicate time to be alert and attentive when you prepare your own taxes, meaning you shouldn’t be tired or distracted. You want to have the energy to answer each question correctly, re-read the questions, have your receipts and invoices ready, and, if possible, have a second pair of eyes look over your work. You don’t want to pay big penalties or fees for simple, avoidable errors.
4 Don’t Cheat the System
The top reason people get busted by the IRS is for hustling the government. Be sure to report the right income and claim all of the side money you’ve earned. Don’t claim dependents you really don’t support. Don’t deduce imaginary business expenses. Do the right thing, and don’t make any claims you can’t back up.
5Handle Your Business ASAP
Owing the IRS is not a life sentence. Stay on top of your correspondence with the agency and make sure you create a realistic payment plan. Ask about all of your repayment options. For example, some folks who owe opt to let the IRS take their future returns as payment. Lastly, please keep in mind the IRS does include interest on top of what you owe, so it’s important to track your debt and repayments.