Category: Common Tax Mistakes

Late for a Very Important Date

11/1/2019

What happens if you are unable to pay your taxes on time? Are there other options for you? Don't panic, that is what we will be discussing!

Tax Day will be here on Wednesday, April 15, 2020, if we are ready or not. You can file your taxes as soon as you get all of your W2s, 1099s, and other tax forms from your employers. One of the perks of filing early is getting that prized tax return early. You should receive it within three weeks of filing. If you file your taxes sooner than most, you won't be fighting against the crush of everyone else who waited until the last moment to get everything filed. But what happens if you've filled out all your tax paperwork and you can't pay what you owe the IRS? What happens if you don't fill out your paperwork and file on time? Take a breath and let's review some options out there for you.

The Bottom Line

First of all, there are options for you so don't panic. If you are unable to pay on time, immediately file for an extension. Once you do this, you have to pay attention and stay on top of your extension just like you would any of your bills. Please know that there are penalties if you don't pay on time and a separate penalty for not filing on time. Not being able to file on time is a much larger penalty than not being able to pay on time. Failure to file is 5% of the money due per month and can go up to 25%. Failure to pay is .5% of the money due up to a max of 25%. If you can't pay right away, at the very least fill out and file your taxes. This way you are aware of how much is due and can hopefully avoid some of these penalties. But interest does add up until your tax bill is paid in full.

Possible Options

Try and find some options to help you pay on time. See if you can borrow money from family to help pay, get an advance on your next paycheck, or sell items you no longer need or use anymore. You can dip into your savings if you need or even tap into your 401(K). These aren't ideal options, but they will help you in the long run. You can pay your taxes with a credit card, but to do this you have to contact a special service provided through the IRS. You will be charged a continuance fee to do so and that adds up to be about 2.5% of what you're already paying. You will also incur interest charges if you can't pay off the credit card payment quickly.

Not Quite Enough

If you can't come up with the money and you don't have a credit card to use, you can work out an installment plan with the IRS. You will need to fill out form 9465, the Installment Agreement Request, and attach it to the front of your income tax return. You might even be able to request a payment plan online. This doesn't mean you can avoid paying interest on what you still owe. This interest will still accrue until everything is paid off. But in this situation, the IRS can reduce any failure to pay penalties.

Not Even Close

If the amount you owe is so large and there is no way possible that you will be able to pay, there is a program called Offer In Compromise, where the IRS may take less than the full amount that you owe. To do this you need to complete form 4334 and 656, along with a collection information statement. You will also need to provide a total financial statement. This includes a list of everything you own, all of your debts, your income, and the amount you can pay right away to make a compromise with the IRS. The IRS will then review this information to see if they will accept the compromise. You are required to pay all tax liabilities on time for the next five years for this compromise. If this requirement is not met, the whole original amount of your taxes will be your responsibility again, more penalties will be added on, and the IRS can get money from you in many other ways that could hurt and damage your credit score, like filing a lien on your property.

Options

The IRS website tells taxpayers not to panic if you can't pay on time, and lays out the general options for you. The big thing they stress is to file on time and then contact them right away to talk about your money situation. Don't hide from them. They will find you one way or the other, you won't fall through the cracks. The IRS can temporarily delay collection by reporting your account as currently not collectible until you can pay, in some circumstances. But they will be more willing to work with someone who is upfront and comes to them rather than those who hide or lie to them. What can help in the long run is making sure the right amount is being taken out of your paychecks, so the amount owed at the end of the year isn't as painful. If you operate as an independent contractor, save a percentage of every paycheck to make up for the fact that no one is taking anything out for you.

Not being able to pay your taxes can cause huge amounts of stress and panic, but try and not let it. Just make sure you are using the options and resources available to you. You will make it through this tax season, and many more to come! For more information and help from the IRS follow the link below!

https://www.irs.gov/newsroom/what-if-i-cant-pay-my-taxes

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Common Mistakes for the First Time Tax Payer

10/16/2019

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Preparing and paying your taxes for the very first time is a terrifying rite of passage into adulthood. But for a first-time taxpayer, it's easy to scare yourself into making very simple and easy mistakes. Take the time to take a deep breath, check your work, and understand what you're doing!

The very first time you pay your taxes is scary. It's scarier than this Halloween season. For most of us, our first tax experience comes with our first job while we are still in high school and living under our parent's roof. But once the safety blanket of Mom and Dad helping you file your taxes or taking you to their tax accountant goes away, things can get pretty dicey. You're out in the world for the very first time worrying about some huge adult things. Where are you going to live, how are you going to get around, how will you pay your bills, can you feed yourself, what will your job be? Those are huge learning curves, and we all go through them. And just like those learning curves, taxes have their curve too.

Most first-time taxpayers are just afraid they'll do it wrong. Afraid they'll miss a signature, not understand the paperwork, or not provide the correct paperwork to prove write-offs or prove their source of income. Sadly, this will happen for most first-time taxpayers. These mistakes can cause your return to be delayed or you can receive a terrifying official letter from the IRS. The letter will point out the mistakes you made, and you will have to correct them all before seeing your tax return. Take a deep breath, we are here to help you solve those issues.

In this blog, we will be discussing some of the most common mistakes made by first-time taxpayers and how to prevent them from happening!

The Basics

It all starts with filing, right? One of the first mistakes made is hearing that you can pick up your official tax forms from the library or download them off the IRS website and print them off. These are all true statements, but you'll be stuck with a pile of papers you might not understand. You might even grab the wrong set of forms. For a first-time taxpayer, the best way to start off and even continue paying your taxes through the years is by investing in a tax preparation software - like Quickbooks. It comes with an impeccable FAQ, an easy how-to guide, and the software guides you through the proper paperwork to correctly file your taxes. It also helps determine what you can write off, what documents you need to complete these write-offs, and what paperwork you will need to save for future tax seasons. It also has an option to store all of this information for you in its database, so you can learn to upload and save everything you need right away and not have a huge stack of important papers, receipts, and documents just lying around waiting to get thrown away on accident. Also good to know, if your gross income is $66,000 or less the IRS offers free file software, too! It might be a pain to pay them every year - but at least they're being helpful about it!

The Numbers

Believe it or not, one of the most common mistakes when filing your taxes is entering the wrong social security number. We get it, you're nervous and overwhelmed. But take the time to take a deep breath and to dig out your social security card and keep it handy while you're filing your taxes. Once you're finished, take the time to check your work. Take a little walk down memory lane and make all of your math teachers happy by checking your work. Entering the wrong SSN can lead to the delay in processing your return and it can also lead to the IRS rejecting exemptions for dependents.

The Side Jobs

It's very common today, especially for younger taxpayers, to have multiple sources of income. This is very true when you're an independent contractor or self-employed. Learning all the finite details of filing multiple w2s or I9s is very tricky, and can become even more difficult if you've worked in multiple states during that tax year. Each state will have its own little different tax laws on how to file these forms. Often in these situations, the young taxpayer fails to include all sources of income. Many decide just to put down the ballpark number of their yearly income. When you receive a 1099 or any other similar tax document, the IRS receives one too. It's their job to compare all of your documents with the ones they've already received and to catch any mistakes. This kind of mistake can increase the chance of being audited, and that is not what you want.

Tax season might still be a few months off, but we wanted to put any worried first-time taxpayers at ease. If you're a parent, family member or friend of a first-time taxpayer, share this with them! We are sure you remember how hard it was the first time you paid your taxes. Remember, we also offer the best Quickbooks training and Quickbooks services in Goose Creek, and are happy to help you and your family whenever you need it. Please don't hesitate to reach out!

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Late for a Very Important Date

Common Mistakes for the First Time Tax Payer

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