4 Tax Tips To Make Sure You File on Time
The IRS has a well-earned reputation for collecting what it’s owed without much in the way of sympathy — but believe it or not, the agency is more of a stickler for paperwork than for payment.
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The IRS issues a Failure to Pay Penalty of just 0.5% on any portion of your bill that’s still outstanding after the April 18 filing deadline. But, if you don’t submit a return on time, the agency will slap you with a Failure to File penalty of 5%.
Considering that it’s 10 times more expensive to file late than to pay late, it’s no surprise that a new GOBankingRates survey found that missing the deadline is the chief concern for more than 13% of the population.
You still have more than a month and a half to submit your returns, which probably feels like a long time. But making the deadline is all about controlling the clock, which you can do only if you avoid surprises.
Follow these steps to complete your taxes before the buzzer sounds.
First, Get Organized
Start by establishing a place to set aside all of your relevant documents and forms so you can tuck them away as soon as they arrive. This way, you’re not scrambling to find missing paperwork as the Tax Day deadline draws near.
Create a folder in Dropbox, Google Drive or — if you’re going old school — in a drawer or filing cabinet in your house. Then, take inventory of what you’ll need for your folder and what you already have.
“If you want to make sure you file your taxes on time, make a quick list of the documents you need,” said Chris Alman, CFP, CEPA and founder and lead advisor of Equip Financial Partners. “This might include W-2s, 1099s, 1098s, charitable receipts, taxes paid, etc. Once you have what you need, you’ll know you’re ready to file. If you’re still waiting for a form, you’ll know to check with the entity providing the form and whether or not you need to file an extension.”
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Research and Plan Ahead
While you’re waiting for your documents, brush up on the many changes that took place in 2022 — the first tax year after the pandemic stimulus era — and clarify which credits were eliminated, reduced or, in some cases, expanded.
Learn about the tax implications that are unique to your situation. If you’re a sole proprietor, for example, you can avoid expensive and time-consuming surprises by understanding the self-employment tax.
Make decisions that don’t require you to have all of your documents, like choosing your filing status and whether you’ll itemize or take the standard deduction. If you’re itemizing, gather your receipts and other supporting documents you’ll need in order to avoid or survive an audit.
Industry heavyweights such as TurboTax offer comprehensive checklists of things to do before it’s time to file so you’ll be ready to pounce once your folder is complete. Also, the IRS reminds taxpayers to create or check in with their accounts at IRS.gov to help things go as smoothly and quickly as possible.
Explore Your Software Options in Advance
The largest percentage of the GOBankingRates survey’s respondents, about 44%, plan to file their taxes with the help of a software provider such as TurboTax or H&R Block — but those are hardly the only options. There’s also TaxAct, TaxSlayer, Jackson-Hewitt Online, Cash App Taxes, FreeTaxUSA, Liberty Tax and more.
Some are best for filers on a budget or the self-employed. Others excel at reporting cryptocurrency holdings and other digital assets. Others are known for excellent customer service, reliable audit assistance or simply for being easy to use.
A lot of companies are competing for your business. Get to know them and their different pricing tiers, decide what you value in a software program and ensure you’re trusting your taxes to the right one when the time comes.
Enlist Help While You Still Have the Chance
Another 25% of survey respondents plan to file through the services of a CPA or tax attorney — and that can be money well spent.
“Tax filing can be overwhelming for some people, and hiring a CPA makes the job easier for you,” said Riva Jeane May Caburog, of the Nadrich & Cohen law firm. “An experienced accountant can help compute your taxes, file the form on your behalf and back you up when the IRS conducts a tax audit.”
The key to filing on time is to secure the services of your chosen tax professional well in advance.
The beginning of March signals the start of peak tax season, when tax professionals earn their living for the year. The experts with the most extensive client lists might already be booked solid, but plenty of good ones still have openings. It’s crucial to contact a few and lock in the services of one you like now. If you wait until mid-April under the assumption that tax pros will be available and eager for your business, it’s a sure way to file late and incur the wrath of the IRS.
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