Understanding Tax Preparation
Understanding Tax Preparation
Tax preparation is an important process that deals with the preparation of tax returns (income tax returns in most cases) for an individual mostly for compensation. The preparation may be exercised by regular taxpayers. They may also utilize preparation software and other online services for ease and efficiency.
Licensed professionals, such as attorneys, certified public accountants or unlicensed tax preparation businesses may also be tasked for the preparation of tax returns. Since the income tax laws of the US are quite complicated, taxpayers are seeking outside assistance for the preparation process. Some states implement licensing requirements to any individual who prepares the tax returns of others for a fee.
Simply put, the preparation of tax returns is a general and straightforward exercise for every taxpayer who has already completed the required documents. However, some folks always manage to get lost along the way while preparing their tax returns. Overcoming these preparations hurdles is crucial so you wouldn’t suffer more problems than you must. Here are some of the challenges of the preparation processes and how you can easily get around them:
Missing Information
Missing documentation is a common issue in tax preparations. Such documents would include 1099 and W2 forms, receipts detailing qualified medical expenses, and even charitable donation receipts. If you happen to run into such problem, you can always request your employer, or even the IRS for a copy. 1099 forms can be easily found within the issuing institution, especially online through their official websites.
Time Limitations
Running out of time is another major setback in tax preparation. Whether you like it or not, there will be times when you will be running out of, well, time. This happens when compiling your tax documentations and processing your tax returns. As always, you can always consider the services of tax preparers to handle your tax issues. But if the tax deadline is already catching up behind you and you have yet to get someone to prepare your tax returns, you can always file an extension so you can have more time for the preparation. However, you must be careful enough to have all your taxes paid before the April deadline to avoid late payment and the penalties that would follow.
Submitting Forms with Mistakes
If you made some mistakes on the tax returns after having already submitted them, you can always have them corrected. Should there be some mathematical errors that would not affect your due taxes eventually, the IRS will make the corrections on your behalf. If it is a case of having wrong amounts indicated in the forms, or omitted entries, then you should file an amendment. To do this, you can simply download Form 1040X from the IRS and then simply file it.
Lastly, if you do not have the cash to pay your tax dues during deadlines, you still have other chances to settle your bills. You can propose for an Installment Agreement (IA) to get out of the situation. This way, you can then settle by paying off your due tax bills over a predetermined period. But this also means you will have to incur some charged interests and late payment penalties though. Another good option would be to ask for a ninety-day extension just to raise the funds.
