5 Tax Preparation Issues and How to Solve Them

Is the time to prepare for tax round the corner? Or have you received a tax notice from the IRS that they are going to audit or examine your accounts? Then, the first and foremost thing you must do is to hire an expert tax professional.

In the same way, if the taxpayer receives any collection letter to check their wages or paychecks, or issue tax levy letter to their bank account, you need to look for the advice of a tax professional immediately. He/she is the only person who can solve the tax-related problem. If you are struggling hard to file the tax returns every year, then you can follow a few key steps which make the process simple and a piece of cake and avoid common mistakes that are made every year.

A few of the common tax problems that are faced by the taxpayers, be it individuals or business person and how can they solve the problems:

For business people:

Keep penalties and fines at bay by learning about the rules about the deductions
The tax deduction is the best way to cut down the taxes when used properly, but many abuse these deductions. The main aim of deductions is not to let businesses from paying a lot of taxes for items that are purchased. The expenses are inclusive of materials, client gifts, travel expenses, and capital expenditure; you cannot include the costs of the company that you deal with or talk to when you on a personal vacation. The IRS has published the rules about the expenses for which taxes can be deducted, what type of expense can be deducted, and under which situation they would be deducting that for taxes. If you include something while preparing the tax that can be questioned by the tax team, you must be able to justify it, and if you are unable to justify it, things will turn worse.

Do not keep a record of your business expenses that have tax deductions
There are a few people who include the expenses that are not part of the tax deductions. Few people would fail to deduct tax on the expense to which they are entitled to get tax benefits due to not keeping up the track of business expenses. This kind of circumstance occurs when people use their personal credit or debit card for business. They do not have a business account that is dedicated to business. They use cash while attending business meetings or going on a business trip. If you are not deducting the legal expenses, then you are cheating yourself from saving the taxes. It is essential for you to keep track of all your business receipts, and you can seek the help of a tax professional so that they help you on which expenses you can get a tax benefit and which expenses you do not.

For individuals:

Fail to choose a professional tax preparer
It is good to get help while preparing for tax from your friend or neighbor. Though this saves money on hiring a tax preparer, but this may end up worse and give rise to various tax problems. If you are not filing the tax as per the government norms, you will end up paying a hefty fine and penalty, or you may have to refund the money that is stolen. So, it is recommended to choose a right and reliable tax preparer. This person will charge a small fee and get the work done briskly and without any mistakes. The return must be prepared by a professional to keep blunders at bay. You need to keep a close watch on the refund amounts before reviewing the documents, fee that is charged for refunds, and fly by night operations that you can put for tax benefit. If you have approached a tax preparer that you found to be a fraud, you can immediately report to the IRS and attorney to get justice.

File the tax after the given timeline
If you file the tax by exceeding the deadline given by the IRS, you would be penalized. Many people file the tax late. If you file late, you would need to pay extra money in the form of fines and penalties. This can also end up with you making mistakes by being in haste to file. The process can take a long time, and this filing can go for auditing. If you are getting late to file the tax every year, it takes a toll on your current returns and will have an impact to get the refund that you own.

Fail to do tax filing
Many people breach tax laws and won’t file the tax returns despite declaration. In the people who do not file the returns, many would not be entitled to pay taxes, and few will not have money to pay taxes and therefore would skip its submission. If you have any problem with filing the tax, you can file an installment agreement request. This allows you to pay the tax amount on the installment basis instead of paying the whole amount at the time of tax return submission. This is a better option than not filing the taxes. Though you may have to pay an extra amount, you won’t get punished for failing to file the returns. You can also file for an extension of returns, which gives you additional time to file the returns without charging extra. This also reduces the penalties and interests when you choose this option over not filing the tax returns.

Also, the other common issue that is faced by taxpayers is mathematical errors. You need to cross-check multiple times when you are filing a tax to avoid errors. Before signing, you need to check the tax returns and then submit it. Though it takes a couple of minutes of your time, it saves time in the future and avoids you from unnecessary troubles. You can also hire a tax preparer to keep these issues at bay.

Author’s Bio:
I’m currently working as a Chartered Accountant with Payroll Service Providers UK. I have a great passion for outsourced accounting services. In a previous couple of years, I have worked with big and small clients across numerous continents. I have a keen interest in outsourcing payroll processing, accounts payable outsourcing, BPO outsourcing, outsource finance, outsourcing accounts, outsource bookkeeping, offshore Back office services, etc.