It’s just about tax time once again, so I thought I would run through a few thoughts about taxes that hopefully will help you during this season. The first issue you should always remember is that ultimately, you and I are responsible for our own tax returns. If we hire a tax preparer that doesn’t follow the law and the IRS assesses additional taxes and penalties, ultimately, you and I are responsible. That is why it’s so important that if you are going to hire someone to do your tax return, make sure you hire a professional and someone who is dedicated to staying current with the tax law. Remember, this year we have a new tax law, and it’s important that your preparer is up to date with it. Just because you used a certain tax preparer last year does not mean you should automatically use the same preparer this year.
This time of year we are about to receive 1099s, W-2s and other tax information. It is important that you save this information for when you prepare your tax return. Remember, when you receive something like a 1099 or a W-2, keep in mind that the IRS is also receiving those same documents. Therefore, if for some reason you do not report a 1099 or something of that nature, you will find that you’re opening yourself up for IRS scrutiny, and I can assure you no one wants that. Therefore, as you begin to receive your tax information make sure you have a tax file to save the documents until needed. If you are not sure if something should be saved or not -save it. It is better to be safe than sorry.
It is important that when you do hire someone to do your tax return that you find out the cost up front. Completing tax returns is no different than any other professional service, and whomever you use should be able to give you a good estimate of what your return will cost to prepare. If someone won’t quote you a fee, it’s probably a good sign that maybe you should look elsewhere.
For many of you there is a way for you to complete your tax return free online using tax preparation software programs. The IRS, for the last 15 years or so, has partnered with a variety of tax preparation software companies to offer free software. To qualify for this, your income has to be $66,000 or less. According to the IRS, about 70 percent of Americans are eligible for this software. To access the software all you need to do is to go to IRS.gov and click on “free file.”
For those of you concerned that the software is through the IRS, you don’t have to be. The software offered is through private companies such as TurboTax. Therefore, if you meet the income requirements, and particularly with the new tax law where filing tax returns should be easier for the majority of people, taking advantage of the IRS free tax preparation software program is something you definitely should consider.
One last note, there has been lots of talk this year that because of the government shutdown, people will not receive their refund until the stalemate is resolved. However, that is not necessarily the case. According to the IRS, tax refunds will be issued despite the government shutdown. Therefore, for those of you who are going to get refunds, there is no reason to delay in filing your returns.
Rick is a fee-only financial advisor. If you would like Rick to respond to your questions, please email Rick at firstname.lastname@example.org.