To avoid any unpleasant surprises in the coming tax season, it's good to review a few simple rules now. As tax season is only a few months away, you can take some precautions to enjoy smooth and successful filing of taxes. Some of the most important things to consider in preventing errors in filing are explained below.
Adjust Your Withholding
As a W2 employee, you'll want to ensure that your tax withholding is not falling short of the minimum amount that you should be withholding. If you pay lower than the minimum amount from your wages, you'll have a balance due when you file your return. If you pay this past the filing deadline, the IRS will treat it as back taxes and charge you penalties and interest. On the other hand, if you withhold and pay more, you will get back the balance through a refund. Ideally, your withholding will be such that you're paying the correct amount throughout the year and you won’t see much of a balance either way.
Inform the IRS of Life Changes
If you were married, divorced, separated, had a child, became employed or unemployed, or began a business, then it will affect your tax filing status. If any major change happened in your personal or professional life, then you should confirm whether it alters your tax filing status.
If you moved or had your name changed, then you must inform the IRS of the change before you file your tax return. If you purchased health insurance coverage from the Marketplace, then you must report any changes in circumstances (changes in income, employment and/or family size) to your Marketplace so that you get the correct amount from premium tax credits.
If you're a 1099 employee, then you'll be expected to file estimated taxes. The self-employed and those receiving income from interest or rent will need to file estimated taxes.
To pay estimated taxes, use Form 1040-ES, Estimated Tax for Individuals. When filing estimated taxes, remember that paying more is safer and helps prevent the chances of incurring a tax liability.
Labels: Back Taxes, IRS, Tax Filing, Tax Refunds, Taxpayers