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tax tips

5 Common Tax Problems and How to Avoid Them

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Taxes are confusing, and they change every year. Let’s go through some common tax problems and how to avoid them. Filing Late 1 in 5 taxpayers waits to file their taxes until just one week before the (typical) April 15th deadline. Missing the filing deadline is expensive: if you fail to file on time, you can expect to pay a penalty of 5% of the unpaid tax for every month or part of a month that the return is late, up to 25% of the unpaid tax. To avoid this, the best practice is to file early. Start thinking about tax prep in January, whether that means gathering your documents and sending them to your preferred tax preparer or gathering all documentation and applicable forms for completing your return yourself. However, if you think you are going to miss the deadline, you should always file for an extension. You can file Form 4868 to push the filing deadline back 6 months – but you still need to pay any taxes you still owe at the same time that you file for the extension. Click here for accurate deadline dates. Typos & Missing Information There are lots of boxes to check and lines to fill out, and it’s very easy to accidentally mess up your SSN or report your income as $52,986 instead of $52,896. Errors that occur when filling out the complicated and often numerous tax forms are very common. To avoid this, you should always go through your forms slowly and deliberately, and also more than once. A good double-check is often the best way to fix errors before you file. Be sure to reference your tax forms and banking information (routing and account numbers) to ensure all the data is correct and present. If you are unsure how to find certain information or are looking for a second opinion, you can always contact a trained tax professional to have them check your work. Miscalculations Because it’s so easy to make small but mighty mistakes when you are entering your information on the appropriate forms, it also means that it’s very easy to file a …

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5 Practices to Prepare for Tax Season Year-Round

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Are you one of the millions of people who dread doing their taxes? Do you always want to put off filing until the very last minute? Here are some great practices to help you prepare for tax season year-round. Schedule Monthly Check-Ins A lot can change in one year. Jobs and income, family status, and so much more. All of these things will affect your taxes, but by the time tax season rolls around, you may realize you didn’t withhold enough, and now you owe a large, one-time sum. It would’ve been easier to manage if you’d caught it sooner, so why not set yourself up for success this year? Just like paying bills or subscription costs, you should also check in with your tax maintenance every month. That way, if you or your spouse had a job change, you inherited a large sum of money, or you started a family, you’ll know what to expect next January, and you can better prepare for it. Keep (& Organize) Your Receipts We know, we know – you have that pile or that box with all your receipts. Or you moved all your electronic receipts to a folder in your email app. But keeping track of the expenses that may result in deductions is an exercise in organization as well as collection. Before making a big purchase or payment, make sure to document the expenses you plan to count as deductions, from rent to mileage to charitable donations. It’s easier to organize one month of receipts 12 times a year than it is to do them all at once and hope you didn’t forget anything. Watch for Out-of-Season Tax Documents Just because you aren’t ready to start thinking about your taxes doesn’t mean you won’t receive something in the middle of the year that you’ll need to keep for tax purposes. When you sort your mail (both physical and electronic), make sure to pay attention to documents that expressly say they are for tax purposes, and to set aside anything else you think might be helpful or needed when you file your taxes. This includes checking your spam or junk folders …

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5 Tax Hacks for Small Businesses

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Running a small business is an Olympian feat, so why not take the easy road on some of those complicated tax items? Here are some great tax hacks for small businesses. Pay Attention to the Tax Calendar One of the easiest ways to save money on your taxes as a small business is to make sure you don’t miss any tax deadlines throughout the year. Often, missing a deadline results in penalties and extra fees, which take money out of your business or your pockets. Mark important dates on a physical or electronic calendar, and set up automatic payments if you can. Start Planning For Retirement Have you set your retirement goals? If you haven’t you should. If you invest more into your retirement today, you can often end up with larger tax benefits. Make the most of your expenses by looking into the benefits of upping your retirement savings this year. If You Can, Go for the Home Office Deduction The home office deduction is a tricky one. But that doesn’t mean it isn’t worth looking into. If you have a home office, whether it looks like a professional office or it’s a modified closet, you can take this deduction if you use that space solely for your business. That means the kitchen table, family laptop setup will not be eligible. But if you have electronics or office furniture that you use for the sole purpose of doing work for your business, it is included in the deduction. There is a new, easier caveat to the home office deduction: rather than figuring out a percentage of your expenses to deduct based on the home space you use for your business, you can simply multiply the square footage of your office (up to 350 feet) by $5, and just deduct that dollar amount. Do Some Good Research on Deductions and Tax Credits There are always ways to optimize your business to secure refunds, or at least to avoid owing taxes after filing. Whether you want to take a deep dive into the IRS tax code or you want to invite your favorite tax professional to lunch, …

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4 Tips for Last-Minute Tax Filing

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2020 was crazy and 2021 is shaping up to be a very busy year. But one constant is the swiftness with which the tax filing deadline approaches. Here are some tips for last-minute tax filing. Beware of Common Errors So You Can Avoid Them In your rush to complete your taxes on time, it may be tempting to “skim” over your work so you can finish more quickly. But this rush, coupled with the new and updated tax programs that were put in place due to the coronavirus pandemic, means you will very likely make mistakes. Here are the most common mistakes to look out for: SSN Errors – One of the most important things to have correct on your tax forms are the names and Social Security Numbers for everyone on your tax return. Make sure to check the SSNs for yourself, your spouse, and any dependents. Incorrect Account Numbers – 8 out of 10 taxpayers get their refunds by direct deposit. If you get your refund direct deposited, it’s worth the time to make extra sure your bank account and routing numbers are error-free. Forgetting to Sign – Your returns are not valid unless they are signed. If you are filing jointly, make sure your spouse’s signature is there, too. File Electronically In a PDF titled “Tips to Help Last-Minute Taxpayers”, the IRS stresses the importance of filing electronically. This is a great way to complete your returns quickly, taking some of that deadline pressure off you. Double Check Your W-2 & 1099 Forms On February 9, the IRS published a news release urging taxpayers to double-check that they received their W-2 and 1099 forms. “With some areas seeing mail delays, the Internal Revenue Service reminds taxpayers to double-check to make sure they have all of their tax documents, including Forms W-2 and 1099, before filing a tax return.” In a typical year, you should receive the following forms near the end of January: W-2, 1099-MISC, 1099-INT, 1099-NEC (new this year), 1099-G. If you are missing forms, you can reach out via …

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I Received a CP01H Notice, Now What?

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Have you received a CP01H Notice? In this article, we’ll discuss what that means and how to fix it. What is a CP01H Notice? If you receive a CPo1H notice, it means the IRS wasn’t able to process your tax return and they’ve placed a lock on your account because the Social Security Number of the primary or secondary taxpayer you provided on your tax return belongs to someone who was deceased before the current tax year. Here’s what that means for you and how you can fix it if the notice has been sent due to an error. Why Did I Receive a CP01H Notice? The CP01H Notice is generated after the SSN you submitted was compared to the records the Social Security Administration has for you. Once the IRS has determined the SSN on your tax forms is incorrect, they send you the notice and lock your account. This is done to prevent identity theft. This may be a simple keying error, where someone (you or your tax preparer) entered an incorrect Social Security Number for you or your spouse (if you are filing jointly) Find out more about 1099 filing penalties here. Next Steps: Correcting an Error If you think the IRS received records in error, the first step you should take is to contact the Social Security Administration to correct the information. Once the Social Security Administration has corrected the information, you’ll need to follow the instructions on your CP01H notice to file your tax return. Next Steps: Unlocking Your Account Your account is automatically locked when the IRS sends the CP01H Notice, which means you’ll have to take some steps to have it unlocked. Here is a list of all the things you will need to send to the same address of the IRS campus where you filed your return in order to unlock your account, according to the IRS itself: A copy of your CP01H Notice letter A written request to unlock the account A photocopy of any one of the following items: Passport Driver’s license Social Security Card Other valid …

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