3 Things Taxpayers Need to Watch out for & Avoid
Filing tax returns can get complicated and tedious if you don’t do it in time. There is a lot involved in filing a tax return that you are likely to omit some important information if you fill it late. Carefully filing your tax returns has the advantage of maximizing your profits if you are in business.
You may enjoy some tax savings and avoid the interests and penalties associated with late-filing or non-filing of the tax returns.
When you work on your tax returns early, you can easily detect errors and correct them before it’s too late. To make your tax filing process easy, here are three things you need to be on the lookout for consideration.
Your Health Insurance
When choosing investment instruments, many people only consider ROI or lock-in periods. It’s prudent to note that not all investments should be about wealth creation or profits.
Covering your health needs is just as important as wealth creation. And there’s nothing better than covering your health uncertainties and also save on taxes. So, ignoring your health insurance is the worst mistake you can make as a taxpayer.
Note that section 80D of the tax laws allow you to claim tax benefits on the premiums you pay to your health insurer. Not only you, but this section also allows you to claim tax benefits on the premiums you pay on behalf of your family members – your spouse and children.
You may realize that health insurance is one of your largest monthly expenses. And as the healthcare prices increase, seeking ways to reduce this cost through tax benefits on your monthly premiums is the best thing you can ever do.
If your employer has enrolled you in health insurance, your premium could already be tax-exempt. That means you wouldn’t claim a tax deduction again at the end of the year. However, you may still claim a tax deduction if your healthcare costs are too high. If you are self-employed, you’ll qualify to write off your health insurance premiums.
Levy Release
If you have a tax liability that you feel you shouldn’t pay, contact IRS immediately for a resolution. Ignoring such obligations will increase your tax burden, and this will not be healthy for your business. You can also seek an IRS levy release if the levy is causing you an economic hardship.
Sometimes, the IRS may decline your request, but you can appeal such a decision. It would be best if you appealed before IRS put a tax levy on your bank account, wages, or property. Even after the levy has been charged, you can still have them refunded to you.
For IRS to release a levy, it has to determine that you had paid the amount you owed, and releasing the levy can help you settle your taxes. It may also be necessary to determine whether paying the levy will cause you an immediate economic hardship. In case your appeal fails, you can negotiate with IRS to allow you to pay the levy in installments.
Mention All Your Income Sources
When filing a tax return, mention all your sources of income. Some taxpayers have the habit of hiding some of their sources of income with a hope that the IRS will not discover.
However, for any side job you do, you’ll be given Form 1099-MISC, and a copy of the same form sent to IRS. It means the IRS will already know that you had some side jobs. Likewise, whenever you open a savings account or an investment account, you’ll be issued Form 1099-DIV and Form 1099-INT statements that show your income in the year.
Copies of these forms are also sent to the IRS. In short, IRS will have all the information about your income in the year, so there’s no need to try to hide some sources of your income.
Filing taxes is a legal requirement, so it is your responsibility to file your taxes before the deadline. When filing taxes, be careful so you can benefit as much as possible and avoid any interest or penalties. If you can’t do the filing on your own, seek help from experts.
