Tax time is an overwhelming and anxious time for many Americans. Preparing and filing your own personal income taxes can be a frustrating process. You will get confused reading rules and trying to decide which schedule you need from the vast array of IRS forms and references. It gets desperate when your backup documentation goes missing, or important receipts you stored are no longer readable. You deserve to receive the maximum possible refund, and not have to pay any more taxes to the IRS.
Many self-preparers get nervous filing their own returns because they know their skills fall far short of a tax professional; yet, they try to do it themselves, hoping their calculations will yield a large refund.
You might consider hiring the professional services of an accountant. It may cost some money; but, it is usually worth it because they are familiar with tax laws, and have a great potential for saving you money. Hiring them to do your taxes could be a smart move and is definitely worth consideration.
What are some common tax problems that taxpayers run into?
Most people come across inaccurate or incomplete data on a form that needs to accompany their income tax returns. This is why it is so important to fill out your employer’s paperwork completely, including the IRS form W-4, before starting a new job. This way you can let your employer know how much you want withheld from your paycheck for federal income taxes. Make sure you have enough deducted every week for federal withholding, or you might have to pay more tax at year end. Make sure to check the appropriate box on the W-4 that signifies your marital status, so that you can calculate your taxes from the correct table.
You can avoid problems with the IRS by keeping your payroll stubs in a secure place, where they can be easily retrieved so you can refer to them later, if you need to. As your tax situation can change from year to year, it’s important that you have a current W-4 on file in your employer’s payroll department. It’s a smart move to fill out the worksheet any time your pay rate changes to make sure you are having enough tax withheld from your check.
The IRS has true and time-tested ways of collecting delinquent taxes, and one of the more effective is called a lien. Liens can be placed on any item of personal property, like a home or business, to secure an unpaid debt and attach the amount owed onto the property’s title. A levy, on the other hand, is an action by the government to force you to pay your overdue tax. When the IRS slaps you with a levy, they are authorized to take the funds right out of your checking or savings accounts, or even your 401(k) plan.
Besides liens and levies, the IRS has other methods they can use to collect tax from you. They can seize your personal property, garnish your wages, audit your bank accounts or any prior year tax returns. These measures can drastically deplete your bank account and have an adverse effect on the rest of your financial life.
For example, the next time you submit an application for credit, your credit history will reflect the levy or lien’s black mark, and your application will be denied. A similar process will occur when you try to buy a car today and pay tomorrow. Before any auto dealer will agree to sell you a car on credit, he is going to make sure you are in a sound enough financial position to pay him back.
Once you have a poor rating on your credit report because of a government wage garnishment, lien, seizure or levy, you might as well plan on paying for everything you buy with cash until the debt is paid and the encumbrance removed.