Are you aware that failure in filing your taxes on time has a penalty of 5% unpaid tax monthly? 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 taxes can be tough if you don’t have a proper tax checklist, but it does not have to be so if you prepare right beforehand. Consider these 5 tips in making your tax checklist.
Clarify Your Personal Info
The IRS needs you to fill in your correct personal information, birth date, and social insurance. You are also required to log detailed information regarding any individuals that are covered under your tax returns. Individuals such as your partner, your children, and other dependants.
Remember to Include Your Income Info
You must record all of your sources of income for proper tax management. Things such as investment income, businesses, and employement. Listed below are a list of income forms needed when filing your taxes.
W-2 forms for the employment income information of you and your spouse.
Received income from alimony.
Social security benefits need Forms SSA-1099.
Pension distributions and IRA will require Forms 8606 and 1099-R.
1099 forms for your investment income
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Be sure to have the right IRS form of your income sources. You also need to report your other sources of income such as scholarships, medical savings account, jury duty, and winnings from glambling. For income documentation, you can make pay stubs through the use of online pay stub generators.
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Don’t Forget to Include Income Deductions in Your Checklist
Income deductions can significantly reduce taxable income. Your refund can significantly be increased as well as reduce the amount of money you owe.
Be Mindful of Tax Credits
Tax credits are immediately deducted from the tax that you owe. But, you require documents in order to claim them. Here below are a list of common tax credits.
Retirement savings contributions or saver’s credit.
Child tax credit if you have children below 17 years of age.
Education credits like tuition fees.
Paying attention to your credits will help you secure a tax withholding reimbursement. Credits come as 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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