Many of us have been there – finding IRS documents in the mailbox, glancing over them with eyes half shut, trembling at the thought of owing money in back taxes. If you owe money in taxes, you might need tax debt relief assistance to help you figure out your next steps.
It’s easy to accidentally miscalculate your taxable income or deductions. Or, maybe you forgot to include some sources of income from previous years and are now being forced to pay it back. Whatever the case, there are steps you can take when filing your IRS tax return to avoid back taxes and IRS debt for good.
The first thing you should do is make sure you’re withholding the right amount of taxes from your paycheck.
If you work for an employer, you can review your W-4, Employee Withholding Certificate and update it if something in your life changes. If you get married, have a baby or get a raise, your financial situation is likely to change. Adjusting it to reflect these changes can help make sure you set enough money aside for taxes.
Your W-4 uses the following information to tell your employer how much they should withhold:
- Your tax filing status, such as head of household, married filing jointly or filing separately, single
- Your number of dependents, like spouses or children
- Additional withholdings, which is a number or percentage amount you want them to take out for self-employed or side income you may have
If you’re self-employed, you must pay income taxes and Federal Insurance Contributions Act (FICA) taxes, which are typically paid by an employer. It may help to use an IRS calculator to estimate your quarterly taxes using an income estimate. This calculator can include FICA taxes in your estimated quarterly payment amount, too.
One tax filing strategy for self-employment is to set aside this money in increments throughout the year so you can pay each quarter as follows:
- January 1 – March 31, pay by April 15
- April 1 – May 31, pay by June 15
- June 1 – August 31, pay by September 15
- September 1 – December 31, pay by January 15 of the next year
Even if you file your federal income tax return before April 15, you may find that you still owe money for the year if you earned more than you had anticipated. On the other hand, you could be looking at a tax refund if you paid more than you needed to.
Another strategy is to gather your tax documents as soon as possible at the start of tax filing season. This can help you resolve any issues in a timely manner. Here are common tax filing documents that you may need:
- W-2 yearly earning statement from an employer
- 1099-MISC contractor yearly earning statement from a client
- 1099-G earning statement for government assistance
- 1099-R earning statement for retirement income
- 1098-T tuition payment and student loan interest statement
- 1099-DIV or 1099-INT earning statements for dividends and investments
- 1098 mortgage interest statement
You may consider using an online tax filing service. Online tax filing services are often the most accurate and efficient ways of filing your taxes, which can eliminate the stress of doing your taxes, reduce the risk of getting things wrong, and alleviate tax debt.
When you e-file your taxes, you can use electronic tax filing programs that do all the calculations and form filling for you. The best tax filing service is one that lets you file your taxes online for free (if you qualify), which you may be able to find with TaxAct and TurboTax.
By Admin –
