Preparing tax returns each year can be stressful, whether you own a business or are simply doing your personal tax return. There is always that fear that you’ll make a simple mistake that causes you to be audited by the IRS. For those who live in states where they must file a state return, the problems can be doubled. This is especially true if you’re not an excellent record-keeper and many of us are not.
Small business owners and those who are self-employed hold especially high risks of making critical errors that could prompt further attention from the IRS. Tax preparation can now be done online to save time and money, but this is not a good idea for certain taxpayers. For instance, if you’re self-employed and claiming a home office and the use of your automobile for business purposes, it may be best to hire a professional.
Tax preparation can be completed using various brands of tax preparation software. This allows you to file online and get your refund much faster. In most states, tax preparation can be completed by anyone with the knowledge and skills necessary. In order to avoid expensive errors, many individuals and business owners use the services of certified public accountants or enrolled agents. Due to the fact that income tax laws in the United States are highly complex, many taxpayers prefer to seek help from licensed professionals.
In some states, there are licensing requirements for anyone involved in preparing taxes for a fee. In other words, a person or business that works at preparing tax returns must be licensed. This law differs by the individual state’s filing requirements.
In 2011, the IRS mandated a national registration of anyone preparing tax returns for a fee. Effective January 1, 2011, almost all individuals or businesses who charge for preparing tax returns were legally required to register. In some cases, the paid preparers must also pass a tax law exam and complete regular continuing education courses. A certified public accountant (CPAs), enrolled agent (EAs) or attorney who prepares tax returns is not required to complete continuing education courses.
Below are the leading methods of preparing a federal or state tax return:
Filing a Paper Tax Return
While the IRS no longer sends packages out to taxpayers each year, it is still possible to file a tax return using the old-fashioned method. If filing a paper tax return, be sure to double check everything, as this method often results in errors. Additional mistakes can be made by a data entry person who is tasked with entering all your information into the computer. You may be required to mail the return to a special address.
Electronic Tax Filing
IRS e-file has become the most popular way to file your taxes. It’s fast and efficient and mistakes are generally caught early on. Most of the popular tax filing software products offer free electronic filing of federal or state returns. If you are unable to file online yourself, there are tax preparation companies who will transmit your return for a small fee. This is called a Transmit-Only Return. Electronic filing requires each person in the family to have a valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
When to File
January 30th of each year is the first date that the IRS will accept and process tax returns for the previous tax season. April 15th is the due date for filing. It’s important to start your tax preparation early each year since there are often numerous documents to gather in order to accurately complete your return.
Paper tax returns are considered filed on time if they are mailed in an envelope that has been postmarked by the due date. When sending your return by registered mail, the date on the registration receipt is considered to be the postmark date. When using certified mail, a postal employee will stamp the current time and date and this is evidence that your return has been mailed on time. If working with a professional tax preparer, it is their responsibility to make sure that your return is mailed out on time and is accurate. If using a private delivery service, they will normally provide you with written proof that the return was sent out on time.
e-Filed Tax Returns
If you e-file your tax return, an authorized electronic return transmitter will postmark the transmission. This electronic postmark records the date and time that the return is transmitted. The IRS uses the date and time in your time zone when determining whether it has been filed on time.
If you do not complete your taxes and file them by the due date, you may be subject to a failure-to-file penalty and interest. To avoid these penalties, you must either file the return or an extension by April 15.
If the IRS owes you a refund, but you did not file a tax return, then you must file within three years of the date that the return was originally due in order to obtain your refund.
The Tax Resolvers can assist you with professional tax preparation or help with any questions or problems associated with filing your tax return. If some type of action has already been initiated against you, we can help. Please call today for your free consultation.
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