Filing Federal Tax Return – 12 Things You Must Know

0
143

When it comes to filing a federal tax return, there are several things that you need to take into your careful consideration. Planning is crucial, especially if you do not want to pay more than the law requires you to pay.

Many people often forget to use different types of tax deductions that they are eligible for and thus end up paying a higher amount of taxes than they are liable to. You will find the following twelve tips very useful in this regard.

Keep Records Of Expenses That You Can Use As Deductions

Many people try to rely on their memory when it comes to preparing a list of deductions that they qualify for. If you do so, it is very much likely that you miss a few important deductions. Therefore, you need to keep receipts of all expenses that can be used as deductions while you are filing a federal tax return.

So, make sure you file all the receipts safely as and when they come so that you can refer to the same when the tax time arrives. It will make things much easier and smoother for you. Besides that, these receipts will also avoid hassles and save your time in case of an audit.

If you have mentioned a reduction in your tax return but are unable to show relevant receipts or documents to support your claim during an audit, you may be penalized for the same.

Keep Yourself Up-To-Date With The New Tax Laws

A lot of new changes are introduced to Federal Tax laws from time to time. Therefore, it is very important for you to be well aware of the new tax updates as and when they come.

The laws undergo several minors and major changes every year. If you do not follow those rules while you are filing your federal tax return, it can create legal problems for you and your business. You can access a detailed list of the new updates on the official website Goatdee of the Internal Revenue Service (IRS); you just have to click on the link ‘1040 Central’.

Alternatively, the updates are also printed in the front of the tax booklet. Before you file out anything, you are strongly recommended to go through the new regulations thoroughly.

Avoid Tax Rumors

Your friends and colleagues do not make the best sources of information when it comes to learning about tax laws. They can only share their experiences, but whatever they tell you may not be accurate. For example, it is very much possible that one of your friends is just lucky enough to escape the audit and use a deduction that he or she was not eligible for.

But, if you also commit the same mistake, it may trigger an audit for you and put you into trouble. Therefore, you are advised to consult an expert accountant or a tax attorney if you have queries regarding anything associated with the federal tax returns. Alternatively, you can always visit the IRS website Pubg pc for detailed information on your own.

Avoid Math Errors

Sometimes, an audit can bring legal troubles for you if certain math errors are detected in the tax return you have filed. Even if you do not intend any fraud and the math errors occurred just by mistake, it can put you and your business into serious trouble and the IRS may penalize you for the same.

Therefore, you are also advised to use calculators to avoid the chances of such errors. The best way to calculate the accurate figures of dedications is by using the online withholding calculator at the official website of the IRS.

Look Out For Deductions That Are Often Overlooked

There are several deductions that people often tend to overlook when they file a federal tax return.

Some common examples include expenses incurred on educational conferences or seminars which you attend to enhance your knowledge in your business field, start-up costs of your business, auto expenses (even if you are using your vehicle for business purpose), purchase of software programs to support your business operations, business-related legal or professional fees, and many other things, such as office supplies, furniture, business-related magazine subscriptions, travel expenses, telephone and internet charges, and even insurance premiums.

So, make sure you spend quality time researching every possible deduction that you can use. This way, you can save a great deal of money.

Avoid Mixing Personal And Business Deductions

A very common mistake that people often commit while filing a federal tax return is that they tend to mix personal and business deductions, which eventually brings legal trouble for them and their business.

Co-mingling your accounts with business funds will make things very difficult for you. On the other hand, keeping separate accounts will make things much easier and smoother, especially when an audit occurs.

Refer To The IRS Checklists

If you are not sure whether you qualify for a specific deduction or not, you are recommended to refer to the checklist provided with the federal tax forums. The same checklists are used at the time of audit to find out if you have claimed deductions that you do not qualify for.

Therefore, you are advised to answer the questions listed out there honestly. Use a particular deduction only if your answer to the question is ‘yes’. If you are found guilty of claiming a wrong deduction at the time of the audit, it will result in a big fat penalty fee and a hefty amount of extra tax.

Avoid Delay In Refund Payments

When people file a federal tax return, they often commit a few mistakes that eventually causes a delay in tax refund payments. Sometimes, the mistakes are very silly; for example, as per the reports issued by IRS, a large number of tax return filers just forget to sign the form.

Therefore, make sure you double-check everything before you submit the form; better, get it reviewed thoroughly by an accountant or a tax expert.

Sales Taxes

Sales taxes typically do not apply to services, but the majority of products usually are taxable unless you are selling specific drugs and food products. You need to learn whether the services or products you are selling are subject to sales tax or not. You must implement a system in your business that should keep track of taxable and non-taxable sales.

Charitable Contributions

Whether you are running an S corporation, limited liability corporation, partnership or a sole proprietorship, you can claim charitable contributions (that usually flow through all types of businesses) as tax deductions.

However, these deductions do not apply in case your business is a C corporation. The following are a few basic things about charitable contributions that you must keep in mind while you are filing federal tax returns.

Contributions made during a year must be used as deductions the same year. You cannot use the previous year’s contributions in the current year’s return.

Sometimes, when you make a charitable donation, you get a gift in return. In such cases, you must deduct the value of the gift from the amount of money you contributed; you cannot just forget about the gift and claim for the entire contribution you made.

There is no way to determine the value of the services or time that you volunteer for charity work, and therefore, you may not use the same as tax deductions.

Most importantly, it is very important to note that not all types of charitable contributions are tax-deductible. You can claim deductions only if the contributions have been made to organizations that are listed as ‘qualified’ by the IRS. You can access the list of ‘qualified organizations’ at the official website of the Internal Revenue Service.

Keep Records For At Least The Last Seven Years

To avoid any possible hassles, you are also recommended to keep records of your documents related to your federal tax return for a minimum of seven years. These documents include copies of capital equipment expenses, incorporation papers, licenses, business tax returns, and many other things, such as vehicle mileage logs, client 1099 forms, and expense receipts.

Employee Taxes

If you have employees in your business, you can withhold different types of taxes from their pay, such as state and federal income taxes, Medicare, and Social Security (FICA). You must also keep in mind that it is legally mandatory for businesses to pay state and federal unemployment taxes, if applicable.

If you have any confusion regarding an issue related to your federal tax return, you can always give a call to the IRS helpline. Even if you have hired a tax professional to assist you with the filing process, you are advised to ask questions wherever things are not clear to you.

Do not trust your accountant or tax attorney blindly. The more informed you are, the better you will be able to protect your business from possible legal troubles and losses. Last, but not least, if you are running a small business, you must subscribe to IRS small business publications.

A complete read through these publications will solve a lot of problems for you and you will be able to make informed decisions.

Submit a Question on “Filing Federal Tax Return – 12 Things You Must Know” or Post a Comment

LEAVE A REPLY

Please enter your comment!
Please enter your name here