8 Important Things to Remember Come Tax Season

Tax season can be a stressful time for both accountants and regular people. With so many rules and regulations to follow, it can be very easy to forget something or do something incorrectly. Depending on what you do, the punishment might be harsh from the government, so it’s crucial that you know and follow all the tax laws. There are a few important things to remember, however, that won’t only help you save money come tax season, but also ensure nothing bad happens. Here are some of the most important things you should remember.

Determine your tax bracket

The first thing you should start to do when getting your taxes ready for the upcoming season is to figure out what income tax bracket you belong to. The bracket you belong to will help determine the maximum percentage of income you’d have to owe the government. How can you go about determining your income bracket? If you are in the UK check out this useful tax bracket calculator. If you are based in the USA, the people at https://taxfyle.com/tax-bracket-calculator state that there are many tools online where you can simply plug in your marital status along with your income, and it will come up with a quick figure that you can use. Why is this useful?

This can help you save your money come tax season. If you made a lot of money and didn’t pay a lot of taxes throughout the year, you can expect to have to owe the government some of it back. By using a tax bracket calculator, you can roughly estimate how much you’re having to owe the government, therefore allowing you to put some money aside. You don’t want to end up paying money you don’t have. Use a tax bracket calculator and figure out where you belong.

Find out if you can lower your bracket

An important thing to look at regarding your income bracket is how close you are to the lower limit. Why does this matter? If you’re close to that lower limit, there are a few things you can do to help get you under it, therefore reducing the percentage of money you’re going to owe the government. In the UK, a small reduction in taxable income can enable you to claim child benefit. Depending on the country you’re in, there are a few different strategies you can employ.

The first and easiest thing would be to look at your expenses, and see if you’re missing anything. If you are working from home, you can claim a portion of your household bills. Any time your car is used for work can be expensed. That, as a result, will lower your income and possibly put you under your bracket. If you have children, paying to have them looked after while you work can also count as an expense, in the USA, but not in the UK.  Another great idea is to contribute to a TFSA or some sort of investment. All of these can help lower your taxable income and allow you to save some extra money come tax season.

Keep your receipts

We’re all guilty of throwing away important receipts that we should have kept. Not only that, but we’re also guilty of misplacing these important receipts, making them almost impossible to find later down the road come tax season. One of the biggest recommendations any accountant will make is to find a safe place to store your receipts. That way, when tax season finally arrives, you don’t have to rip apart your house to find them. These receipts are important when it comes time to expense some of your purchases. If you don’t keep them, it will be hard to claim them as such. Keeping your receipts isn’t the most difficult thing to do, either. As soon as you get home after making a purchase, put them in a box and leave them there. Or better still use a receipts app and you’ll just have to photograph them. Your future self will thank you for being organized.

File your return on time

April 15th, 2021 is the tax return due date in America for the 2020 period. In the UK it is 31 January each year. Any tax returns submitted later are subject to a penalty. One of the biggest mistakes people make when it comes to filing on time is that they are afraid of not being able to pay the tax and ensuing interest.

Whether you submit your tax return or not, you’ll be getting charged interest starting from when the payment is first due. Submitting your return late won’t change this date at all. However, the huge downside to submitting late is that now, not only are you going to have to pay interest for the missed payments, but you’re also going to face a fine or possibly even worse for not filing on time.

Hire an accountant if needed

Depending on the type of person you are, filing your own taxes can either be a straightforward process, or an extremely challenging and time-consuming one. You can definitely learn what you have to do. However, it will take a lot of your own time. If you’re a person who’s unsure of the laws surrounding a tax return and aren’t interested in taking the time to sit down and learn how to file, turn to an accountant to help you out. Accountants are trained to file out tax returns and submit them for you.

When looking for an accountant, take your time and look around. Some accountants may charge an exorbitant amount of money for their services. You can easily find someone who’s affordable by looking around. The other benefit to using an accountant to file your taxes is that you can expense the payment you give them. This is another tactic to help lower your income bracket. If you’re unsure about doing your taxes, hire a professional to get it all done for you.

Use a software programme

If you do want to go about doing your taxes by yourself, there are many programs you can use. While some software programs cost money and are easy to use, there are just as many free pieces of tax software out there as well. If you spend a few minutes with it, you can easily get the hang of the program and easily file your taxes there. These programs will often have several suggestions for you about what you can claim as deductions or tax credits. If you plan on filing taxes by yourself, there’s no reason why you shouldn’t be using a program to help out.

Audits aren’t necessarily bad

When it comes to getting audited, there are often systems in place that scan your return and see if you need one or not. If you fill everything out correctly, the system will clear you, and you’ll be okay. There are a few things, however, that will trip the system and flag you for an audit. This doesn’t necessarily mean you’re going to be fined.

Simply put, the IRS has suspicion that you didn’t accurately file your taxes and won’t investigate to see if that is the case. If, when they investigate you, they find out that you filled everything out correctly, they will go on their way and leave you alone. However, if there are any mistakes, they will look into them and see if it will affect how much you have to pay the government. Depending on what they find out, you might end up paying more in taxes, have some interest added to payment, have a fine added to your payment, or even worse, have jail time. If everything was done correctly, you shouldn’t have to worry when it comes time to get audited as everything will sort itself out.

List all your income

When it comes time to list the income that you made for the year, you must list everything you did to make money, not just your main job. Say, for example, you work at a business from 9-5, but go home and teach an instrument to people in the neighborhood an hour each day. That money you made from teaching is also taxable income and must be listed on your return. Failure to list that is tax fraud, and can have serious repercussions depending on the severity. Don’t risk things like that. Simply list the income and pay the taxes for it.

These are all important things to remember when it comes time for tax season. Try to make the period as easy as you can for yourself by getting everything prepared in advance. If you have some extra money to spend and don’t want to deal with this at all, get yourself an accountant to make life easy. What do you plan on doing come tax season?