Dealing with your financials can be a pain, especially when you are a growing business or solo venture. If you aren’t really paying attention to how you are keeping your records, tax time is always going to be a pain. It will be like sorting through your entire year of work to find the right needles in the haystack. The worst part is, if you aren’t doing what you need to be doing with your money, the IRS could have a thing or two to say about that.
No one wants to have a chat with the IRS, especially if it’s about the money owe them. Our goal is to help you avoid that at all costs, so we put together 5 great tips to help you keep your taxes in order, and what to do if things go wrong with your taxes.
1 – Keep Better Financial Records
The biggest mistake that people make year over year is keeping poor records of their inflows and outflows of money. Remember, you need to keep track of your financials throughout the year to make the end of the year easier on yourself. If you don’t have all of your inflows and outflows together in a simple and easily accessible (to you) place, you will never be ready to get your taxes filed on time.
To make it easier on yourself, try keeping records in monthly or quarterly increments. Breaking them down to these time frames will help keep your files organized better than simply relying on a big file for the year. If you are running a small business, you can keep sales and expenses as seperate files for the sake of ease. If you are an employee, make sure you are keeping really good track of your receipts and paychecks. This will make sifting through the past year easier on you or your tax professional when you go to file.
2 – Stay Up to Date with Tax Law
Our tax law is always changing, and growing for that matter. At the rate of change in the recent past, we will be looking at a tax code over 100,000 pages long by 2050. That means staying up to date with the tax code can be a full-time job on it’s own. If you aren’t ready to stay up to date with this ever-changing and growing tax code, make sure you hire a tax professional.
If you are still planning to do your own taxes year after year, make sure you paying close attention to the changing rules. If you deduct like you did last year, you might get in trouble for overestimating your deductions, or vice-versa. Either way, that could end in an audit, or worse.
3 – Hire a Certified Tax Professional
As the tax code evolves, it becomes more and more important to look into the services of a certified tax professional. Like we mentioned before, the tax code is really long, and it only seems to be getting longs as the years go by. That means there is always more information to handle and apply year over year. Since it’s their job, the certified tax professional will be up to date with the changes and additions to the tax code. On top of that, hiring a tax professional can give you another person to fall back on for any errors in your filing that result in IRS notices. That’s good for you if you need to go back to the negotiating table with the IRS.
4 – Contact the IRS with Issues
If you are going to run into issues with getting your filing in on time or making your payments on time, you really want to contact the IRS about your situation. If you let them know ahead of time that things are not going to be as they are supposed to be, the IRS will be more willing to work with you. The IRS is one of those places that just need to know. They are still people at the IRS, so they will be far more willing to work with you through issues with your filing if you have taken the initiative to make them aware. If they find the issues and make the first contact, you might not be so lucky.
5 – Hire an Attorney if You’re Charged
If you do run into issues with the IRS, you want to hire a tax defense attorney to work with you on your case. That means anything from a simple audit to full fledge criminal charges can be worked through if you know what you are doing, and a tax attorney can help you avoid charges altogether. Before you’ve been charged with anything, contact an attorney to take your case with the IRS. If you have already been charged, you will want to see if your attorney can help you avoid taking a charge in the first place. There are programs for taxpayers that help the IRS get what they want, money, while you get what you want, no negative legal consequences.
Don’t Gamble With Tax Time
You really want to make sure that your taxes are in order every year. That means taking the time to keep your financials in order throughout the year and staying up to date with the current tax codes. If you don’t do either of those, you will end up taking a gamble when you file your taxes. That could result in audits, penalties, and even criminal charges. It might not seem like a big deal now, but it will when 30% of your paycheck has to go to the IRS until your debts are paid off, or they put you in jail for willingly misleading the IRS with your returns. Neither ends in a great time for the taxpayer, you.