Tax season is rough for tax professionals, advisors, and small business owners. Still, some of them wait for the end moment to think about the tax returns. Rather than waiting, taxpayers should think proactively about the challenges that they could face during tax season and their possible solutions.
Knowing the problems that can arise during tax season can decrease mental stress, chances of error, and IRS penalty.
This infographic lists some of the common tax problems with solutions of which everyone should be aware.
Let’s see in detail:
Table of Contents
1. Changing Tax Laws Every Year
Every year tax laws are altered, added or removed. Tax professionals need to stay updated on all the changing tax laws in order to prevent last-minute hassles and maximize tax savings. The best source to stay updated on the changing tax laws is Internal Revenue Service (IRS), as it is the organization enforcing these laws.
Other than this, various blog posts offering tax news, webinars, professional organization, google alerts are some of the useful resources.
2. Errors in Tax Filing
Mistakes in the tax returns can lead to IRS audit, penalties, and delay in the refunds. According to The Bryson Law Firm, the error rate of e-filed tax returns is 0.5% as compared to the error rate of 21% for paper returns.
So, filing tax electronically can minimize the chances of error. Apart from this, reading IRS instruction carefully, double-checking all the calculations, signatures, and information entered are some of the ways to decrease the chances of error.
3. Lack of Documents
Tax season could be smoother if all the essential documents required for tax filing are prepared beforehand. Stay organized and keep a folder to save all the necessary documents like income-related documents, personal documents, last year’s tax return documents, etc.
Some business expenditures and all the charity donations are eligible for tax deductions, so keeping all these documents ready can be helpful to prevent the last-minute hassle.
4. Security of Taxpayer Information
Tax professionals possess some of the most sensitive information of the taxpayer. Protecting taxpayer data is not only a sensible business practice but also a law for professional tax preparers.
Some of the ways to make sure that all the clients’ data is safe are creating a data security plan, using cloud-hosted tax software, being careful of the phishing mail and staying updated regarding warnings issued by the IRS.
5. Amended Returns
Amended returns are the returns filed to make corrections in the tax returns of the previous year. They are used to correct errors and claim refunds for the previous year.
Before starting the process of filing tax returns, keep the data from the last year’s tax return ready because that can affect the filing process of this year. In that scenario, it is recommendable to take the help of a professional tax preparer to avoid any further issues.
The problems mentioned above regarding the tax season and their solutions can surely help tax professionals and small business owners to stay calm and reduce post-tax season pressure.
Tax filing may be a rough ride but keeping these points in mind can surely make tax season a walk in the park.