Are you aware that you can receive a penalty of 5% unpaid tax per month whenever you file your taxes past the deadline? You also have to pay a mandatory $135 or the sum of taxes you’re indebted to pay the government(whichever is the lower amount) if you file 60 days past due.
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IRS reports say that about 5% of Americans were unable to file their taxes in the year 2018 and accumulated a debt to the IRS of about $130 billion dollars in interests, back taxes, and penalties.
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Filing your taxes is quite the daunting task without the right checklist, but with proper preparation you can go through with it in a breeze. Here are some tips in making your tax checklist.
Clarify Your Personal Info
The IRS will need you to provide your personal information, date of birth, and social insurance. It is also advised that you include correct information regarding individuals you have covered under your tax returns. These are your children, your partner, and other dependants that are covered under your tax returns.
Never Forget Your Income Info
You must record all of your sources of income for proper tax management. These can include income from investments, employment, and businesses. Listed below are a list of income forms needed when filing your taxes.
W-2 forms you’re your you and your partner’s income from employment information.
Income you have received from alimony.
Forms SSA-1099 for your social security benefits.
Forms 8606 and 1099-R.
1099 forms for any income received from investments.
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Make sure to have the proper IRS form for specific income sources. Other sources of income such as jury duty, winnings from gambling, scholarships, and medical savings account, also need to be reported. You can make use of online pay stub generators to create pay stubs for documentation.
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Don’t Omit Income Deductions from Your Checklist
Income deductions can significantly reduce taxable income. This can reduce the amount of money you owe.
Pay Attention to Tax Credits
Tax credits are directly deducted from your taxes unlike tax deductibles that work to reduce the amount of income that is taxable. These will need documents in order for you to claim them, however. Here below are a list of common tax credits.
Retirement savings contributions.
Child tax credit if you have children under 17 years of age.
Education credits for example tuition fees and the likes
Paying attention to your credits will help you secure a tax withholding reimbursement. Credits are either refundable or non-refundable. If your refundable credit exceeds the amount of your taxes, you get a refund of the difference.
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