To file a yearly tax return is unavoidable for millions of people in the United States. However, the IRS granted everyone until July to file their tax returns last year because of the COVID-19 pandemic. Since no such extension has been offered this year, you will have until April 15 to submit your forms.
However, just because you have the option of filing later does not mean you should. To file early this year, you must do it in February. In February, the IRS will accept returns for the 2021 tax year.
Early filing can result in a more accurate return, more time to pay a tax payment, and a lower risk of identity theft related to taxes. In addition, there is no reason to wait for individuals with simple tax returns.
This article will see why claiming tax returns early on is beneficial and how can AOTAX help Indians working in the US.
Why File Taxes Early?
Although many taxpayers file their tax returns on or before April 15 each year, there is no need to put it off until the last minute. Indeed, submitting your tax return early can make sense for several reasons, including obtaining your refund faster and reducing your risk of identity theft.
Even if you don’t file early, there are compelling reasons to start your tax planning as soon as possible. For example, it offers you the time you need to gather the documents and information you’ll need to claim all of your deductions—avoiding the stress of rushing for receipts at the last minute.
The Benefits of Filing Taxes Early
There are several advantages to filing tax returns early instead of waiting until Tax Day:
1. File early for a faster refund
You may prevent procrastination, get peace of mind, and cross this critical item off your new year’s to-do list by filing early. So, why not submit yours once the IRS announces that it will begin processing returns?
The IRS issued refunds to 129.8 million filers for the 2020 filing season, averaging $2,815 per refund.There’s no reason to let the government keep your money for any longer than necessary if you have money flowing to you. In addition, because the IRS will not be as busy early in the tax season as it would be in April, filing sooner means a faster refund.
Some people rely on their tax refunds to cover significant expenses. If you file early, you’ll get the money sooner and avoid having to take out an expensive short-term loan to meet those charges, which is especially important if you’re still paying off your holiday obligations.
2. File early to avoid identity theft
The sooner you file, the less time a fraudster has to file in your name and steal your money. This can cause havoc, especially if the fraudster claims bogus deductions, fails to declare income, or otherwise taints a tax return filed in your name.
It might take months to clean up a mess like this. Unfortunately, you may not realize you’ve been a victim of identity theft until the IRS alerts you to a potential problem with your tax return. The IRS warns that you should be on the lookout for tax-related identity theft if:
According to IRS records, you have to pay money for an employer you did not work for.
Due to a duplicate Social Security number, you cannot e-file your tax return.
When you haven’t taken any action, you receive an IRS notice that your current online account has been accessed or disabled.
You get a notice from the IRS that an online account in your name has been created (and you did not make it.
You receive a letter from the Internal Revenue Service (IRS) inquiring about an unfiled tax return that appears suspicious.
You get a tax transcript in the mail even though you didn’t ask for it.
You receive notification from the IRS that you owe extra tax or that your refund has been offset, or that measures have been taken against you for a year in which you did not file a tax return.
Filing early allows you to fully comprehend any changes in tax legislation and deal with life situations that may affect your filing status. Last-minute mistakes can result in audits, resulting in penalties and interest. This premise is more essential than ever, given the Tax Cuts and Jobs Act (TCJA).
Your certified public accountant (CPA) or other tax preparers will be less busy than in April in January and February. Early access implies your CPA will have more time to properly analyze your case and assist you with your tax return.
You will need information from your most recent tax return, whether you’re purchasing a house or going back to school (and applying for financial aid). You will have the most up-to-date information if you prepare your taxes early.
4. Avoiding amended returns
You’ll have more time to file a correct return if you start early. An incorrect return will most certainly be rectified. Audits are more likely to occur when returns are amended.
Here are some things to keep in mind as you strive for precision:
Official documents contain errors. W-2s, 1099s, interest statements, and anything else used to substantiate a deduction should all be checked. In addition, mistakes are made by businesses, banks, and financial organizations. Before you file, ensure you correct any such errors.
Early filing may result in the loss of essential documents, such as a 1099 or K-1 that arrives late. Therefore, double-check that you have all the necessary documents before clicking “submit” or dropping your return in the mail.
Amendments that are not complete. If you have to change your return, don’t just fix the parts that benefit you. Anything incorrect should be corrected.
Changes to tax forms. Form 1040 has changed due to the Tax Cut and Jobs Act (TCJA) of 2017. If you previously filed Forms 1040-EZ or 1040-A, you will no longer be able to do so. If you’re above the age of 65, you can now use the new 1040-SR “U.S. Tax Return for Seniors”.
Legislation enacted before April 15 may not be implemented into paper tax forms or outdated tax software. So keep an eye on the news. Also, keep an eye out for any alterations that may have gone unnoticed. You can file an updated return if necessary.
5. Time to save
If you owe the IRS money, filing early provides you more time to save. However, even if you owe the IRS money, there may be a compelling reason to file your tax return right away.
You don’t have to pay any taxes you owe until the filing deadline if you file your return in the middle of January. However, if you prepare your Form 1040 ahead of time, you will have more time to coordinate your payment.
In addition, those that need to calculate out how much they will owe the IRS will benefit from the extra time.
Waiting to find out you owe more than you anticipated could put a strain on your finances. So, to avoid an unexpected tax bill, the IRS recommends monitoring your withholding and tax payments in the fourth quarter of the year.
6. Avoiding a tax extension
If you file your tax return early, you may not need to file an extension. Rather than being a financial need, time extensions are frequently required owing to disorganization.
Some people who wait until the last minute to file their taxes simply need more time to hunt for more deductions or gather receipts.
If you rush the process too close to the deadline, you’ll almost certainly need the assistance of a tax professional to help you organize your finances and file your return.
Even worse, if you file an extension but don’t pay what you owe if there is a balance owing, the IRS will charge you interest and penalties on the unpaid tax bill until it is paid in full.
What Happens If You File Your Taxes Late?
Most people have until April 15 to file their federal income tax returns and pay any taxes they owe. However, the IRS is authorized by law to impose penalties on taxpayers who fail to file a tax return or pay taxes owed by the due date. In the absence of reasonable cause, a failure to file a penalty is assessed on returns filed after the deadline or extended deadline.
What are the consequences of filing taxes late?
Is a penalty imposed by the Internal Revenue Service for not filing taxes on time? Yes, there is:
For each month or part of a month that your return is late, the combined penalty is 5% (4.5% late filing and 0.5% late payment), up to a maximum of 25%.
The late filing penalty is imposed on taxes that are not paid by the due date. Therefore, the total tax displayed on your return fewer amounts paid through withholding, estimated tax payments, and allowable refundable credits equals unpaid tax.
If you still haven’t paid after five months, the failure to file a penalty will be increased to 25%; however, the failure to pay fine will remain in effect until the tax is paid.
Failure to file and pay results in a total penalty of 47.5% of the tax (22.5% late filing and 25% late payment).
If your return is more than 60-days late, the minimum penalty is the lesser of $435 or 100% of the tax that must be declared on the return.
The Bottom Line
Many people wait until the last possible moment to file their federal income tax returns every year. Despite this tendency, there are several reasons to file your taxes as soon as feasible.
You should file your return as quickly as possible if you are eligible for a refund. There are additional benefits to filing early for individuals who owe a balance.
Are you looking at filing your taxes early? Then, AOTAX can relieve you of this burden by filing your Tax Returns for you.
We are Registered Tax Agents with vast hands-on expertise, and we take great pride in assisting our clients in achieving their objectives. Thanks to a team of highly skilled and experienced Tax Accountants, we do everything we can to reduce your tax liability while making the overall taxation process as efficient, simple, and cost-effective as possible.
The person you refer and who pays taxes through our services is also eligible for this referral bonus. This bonus amount can be used to deliver their tax services or exchanged for an Amazon gift card.Contact us if you are an IT professional working in the USA and looking at filing tax in the USA.
An IT job in the US comes with an H1B visa and income in dollars. But it soon loses its charm when it comes down to income tax filing. As per estimates, H1B visa holders nearly pay 35% – 40% of their gross income as various taxes – federal, state, and local. (How much tax do H-1B holders pay? – Greedhead.net) Hence, to cut down your losses and maximize your savings, it is important to have a tax planner by your side that will help you be tax compliant and reduce the tax burden.
While filing your income tax returns (ITR), you can choose between a tax preparer and a tax planner (advisor). A tax preparer will help you with your immediate income tax filing. While a tax planner can help you with your taxes in the long run.
Job of a tax planner:
Everyone has financial aspirations they strive to achieve for themselves and their family. Some want to buy a house, save for retirement, children’s education, or build assets to enjoy during their sunset years. An efficient tax planner understands these goals, analyses their feasibility, and draws out a financial plan to achieve them. They ensure that you fulfill your ambitions without defaulting on your tax payments with the Internal Revenue Service (IRS). They help reduce your tax liability, maximize your tax credits and build wealth accordingly. If you hire a good tax planner you can build assets that you and your family can enjoy.
Qualification:
A tax planner is an expert in their field and knows taxation laws. They are aware about the latest tax laws and procedures. They are also Certified Public Accountants (CPA) in general tax planning or is a specialist in a specific area of tax laws. They are not subject to any state or federal regulations.
Services A Tax Planner Offer
Apart from income tax filing, a tax planner offers you the following services:
They provide financial advice to reduce your tax burden in the years ahead.
They advise on how to maximize your income with appropriate tax savings.
They give advice on financial issues like buying a home, retirement savings, etc., which will help you save taxes.
They help when you get in trouble with the IRS over a tax issue.
Six Steps To Choose A Tax Planner For Income Tax Filing
By now, you have an idea of your financial goals. Now its time for you to choose a tax planner who helps you achieve all this without breaking a sweat. Here is a fool-proof 7 step plan to choosing a tax planner:
1) References: Choosing the right tax planner is essential to have a smooth income tax filing experience. It also makes your life hassle-free all year-round instead of just January-April. The easiest way to find the right tax planner is to ask friends and relatives. You can ask your H1B visa-holder colleagues to give you some references.
2) Check credentials: Once you have found a planner you think is right for you, ask them for some references and credentials.
3) Experience & expertise: Relevant experience matters when you are caught on the wrong side of the taxation laws. Look for a planner whose resume has the number of years they spent in the field managing the IRS. Find someone whose specialty is handling niche clients. For instance, AOTAX has spent 15 years helping over 2 lac Indian H1B visa holders plan and file their income taxes. They are a team of tax planners and advisors who have helped their clients maximize their tax savings.
4) Multi-tasker: Look for someone who can not only be your trusted financial advisor but also a tax preparer. They will help you create wealth as well as file your ITR on time.
5) Check for complaints: This step is important and saves you a lot of time. Check with the Better Business Bureau if there are any complaints of fraud against the advisor if they are also a tax preparer. You can even check with the American Institute of Certified Public Accountants (AICP) if the tax planner/advisor is being investigated for any complaints.
6) Fees: Be clear about the fees you will pay them for their services. Most planners charge a percentage of your asset in question.
7) Ethics: Being ethical is important when you pay your taxes. If a tax planner suggests dubious ways to save tax then that isn’t right. If they suggest to over or under-report your income, claims dependents when you are not eligible, that is a red flag.
With these steps, it is possible for you to easily hire the best tax planner and pay your dues. Plus you can also make the most from your current income.
If you are an H1B visa-holder from India looking to file your income tax returns in the US while saving some extra dollars, do get in touch with us on AOTAX.com. Our team of expert tax planners can easily meet your financial goals. Recommended: What Makes AOTAX the Most Preferred Tax Assistant in 2022
With the golden ticket of H1B visa comes the clear path toward the American Dream. And of course, with the American Dream comes the American Reality—the brick-and-mortar behind-the-scenes that go towards building a life in the USA.
Tax returns are very much a part of this reality, and while reaping the system’s benefits may be smooth-wading through, the paperwork at the end of it is not.
However, filing your tax returns doesn’t have to be all drudgery and doom. Being organized is critical, and we help you out below with an extensive list of all the possible documents and forms you may need to file individual income tax returns.
Who Qualifies for Tax Returns in the US
However, before diving in, let’s quickly look at who exactly qualifies for paying taxes and receiving the returns that come with it.
To refresh, any individual who meets the ‘Green Card Test’ or the ‘Substantial Presence Test’ is considered a resident alien and thereby is liable to pay taxes in the same manner as any US citizen.
Here’s a breakdown of the two tests:
The Green Card Test—if you have not renounced your alien registration card (a green card), and neither has your privilege of immigrant status been terminated by the USCIS or a federal court, you pass the Green Card Test.
The Substantial Presence Test—you pass the SPT if you have been residing in the US for at least 31-days of the current year and 183-days total over the current year and the two years preceding it. More specifically, this count must include all days in the current year, one-third of the days present in the year before the current year, and one-sixth of the days present two years before the current year.
Now, let’s look at precisely what you need to file a complete and accurate tax return. To make things easy, we’ve grouped the documents according to their function.
Personal Information and Dependent Information
Basic information forms the crux of tax returns in the US, so it is essential to keep the following documents handy:
Previous tax returns and statements for reference.
Social Security or Tax ID numbers for both you and your dependents, if any.
Income-Related Documents
Furnishing proofs of earnings is an integral part of filing your taxes. As an Indian professional residing in the US, it is important to note that you are liable to declare your global income (from every source) in your tax returns.
That means earnings on mutual fund dividends, interest earned on stocks, bank deposits, and fixed deposits, among others, are all taxable. Below is a list of documents you may require while filing:
W-2 forms from employers.
Form 1040 to declare taxes paid in previous years and to declare foreign income.
Form 1099 series, each ending with a different suffix for different revenues earned. For instance:
1099-INT (interest income)
1099-G (government payments and tax refunds)
1099-K and 1099-MISC (freelance gig payments)
1099-R (pension income)
1099-S (stock sale income)
1099-B (property sale income)
1099-DIV (dividends)
1099-SSA (Social Security benefits)
Form 1095-A for Health Insurance Marketplace Statements.
Records of cryptocurrency transactions and interest earned.
Expense records such as bank or credit card statements.
Compiling the applicable documents below could help reduce the taxes you pay:
Records of donations to charity.
Homeownership documents such as mortgage payments and property tax statements.
Medical expense statements such as hospital and doctors bills and health insurance payments.
Childcare and educational expenses include daycare fee payments and tuition fees or loan payments.
Proofs of retirement account contributions.
Records of state and local income taxes paid.
Documentation for Credits
Tax credits are as valuable as deductions and help reduce your tax liability. It is important to have the necessary documentation in your tax return to claim these.
Here are some of the most common tax credits you can claim:
Child Tax Credits that are worth up to $3600 per child. Hold on to Letter 6419 for the same.
For foreign income tax credits, fill in and attach Form 1116 to your return to reduce the brunt of taxes paid on income earned back in India.
Adoption Tax Credits for families that have adopted children.
Dependent Tax Credits in case you are supporting a dependent while unemployed yourself. This credit reduces liability to offset the cost of paying for a dependent without a steady income.
Income Adjustments and Declarations
With personal and financial changes such as job changes, getting married, or having children, it is advisable to reconsider your withholding.
In a country with regulations far different from what we’re used to in India, preparing for tax season is taxing, saying the least. However, organizing your receipts, statements, and forms is an excellent first step to take.
However, filing on your own without knowing how to claim credits or deductions or whether you’re even eligible for them is doing a great disservice to your bank balance.
AOTAX has been helping Indian IT professionals in the US for more than 15-years and is well-versed in the challenges you face and how to get the best returns in your situation. Let us help you with our planning, advisory, and consulting services to ensure you only have to enjoy the American Dream while we take care of the American Reality. Sign up for free today to get a feel for how we work and what we can do for you.
W-4 is a form issued by the Internal Revenue Services (IRS), and employees use it to tell employers the amount of tax to withhold from each paycheck. Previously known as “Employee’s Withholding Certificate,” all employers use the W-4 form extensively to remit taxes on behalf of the employees to the IRS. However, some changes were introduced in 2020, which are essential to note.
The W-4 form needs to be filled out if you switch jobs and have a new employer. You also need to fill it out if you want to adjust your current withholdings. However, if you already have an existing W-4 form with the current employer, you need not fill it out again.
Filling the W-4 Tax Withholding Form for 2022
The W-4 form holds considerable power to make your taxation journey better and save money. Here is a look at what it is used for and how to fill it:
Why Should You Fill out a Form W-4?
For most, it is essential to fill out Form W-4 for 2022 to avoid being slammed with a large tax bill or a giant refund while filing tax returns in 2023.Saving on colossal tax bills could enable a more productive and profitable investment of the same money or invest in other essential expenses during the year by simply filling out a W-4 form.
Although it is not mandatory to update your withholdings every year, the IRS strongly recommends revisiting the W-4 form each year to add in any extra allowances.
What Changed in the Form W-4?
Here are some of the critical changes in effect for the new and updated Form W-4:
Name of the form
Form W-4 was initially known as ‘Employee’s Withholding Allowance Certificate. However, Form W-4 no longer calculated allowances from 2020, which led the title of W-4 to be shortened to ‘Employee’s Withholding Certificate.’
Personal allowances worksheet
A taxpayer could initially lower their federal income tax through W-4 by factoring in personal exemptions. Their exemptions allowed for deductions against a taxpayer’s income, reducing their taxable income. These exemptions were tied to allowances. As personal exemptions are now gone, there is no need to determine the number of allowances.
Personal Allowance Worksheet from page ‘3’ of the old W-4 form is eliminated.
How to fill out a W-4 form
You can access the W-4 form through the IRS website. Here is a step-by-step guide into how to fill out the W-4 form:
Step 1: Enter personal information
This section requires you to enter details about your basic information such as:
Name
Address
Social security number
City/town, state
ZIP code
Filing status
Step 2: Multiple jobs
This step is useful for people who have multiple jobs or are married, filing jointly, or people whose spouses are also working.
It is also an essential and useful part for people whose financial situations depict withholding more or less than the standard amount. For example, some of the factors recorded here are income from freelancing contracts, a second job, or a spouse’s income.
Step 3: Claim dependents
Your eligibility for the child tax credit gets determined through this section. Taxpayers with a total income of $2,00,000 or less will be eligible for the tax credit. If the taxpayers are married and filing jointly, this limit is increased to $4,00,000. In that case, you can simply mention how many kids and dependents you have and multiply them by credit.
Step 4: Adjusting the holdings
This is an optional section that helps you to indicate other reasons to withhold more or less from your paycheck. Some of the parts that are included here are:
Other income (not from jobs): This could be dividend or retirement income, basically any income that may not be subject to withholding.
Deductions: Itemised deductions like charitable contributions or mortgage interest includes items that will exceed your standard deduction.
Extra withholding: Any extra withholding you want to withhold each pay period.
There could be several reasons to refine your withholdings and reflect the adjustments in the W-4.
Step 5: Signature
Signing the form is very important as it will render it invalid if the sign is missing.
Should you fill out Form W-4?
Whether you should or not fill out the Form W-4 depends on answering a few questions, like:
Are you married or single? If married, does your spouse work?
Do you or your spouse have a second job?
Do you have any new dependents?
Is there a chance that you won’t use the standard deduction?
Did you get a large tax bill or have a large refund last year?
If the answer is ‘Yes’ to any of the above questions, it is good to revisit Form W-4 and fill in the crucial details.At AOTAX, we have helped Indian IT pros file tax returns in the US for over 15 plus years. By generating your Tax Returns for you, we can relieve you of this stress in a cost-effective manner. To start filing your 2021 tax returns, click here.
People spend hours pondering over taxes at some point in time. It is upsetting that taxes add to the already busy lives. However, you can make the job a lot easier with a good tax consultant.
In this blog, we’ll unpack the advantages of AOTAX over other tax consultation services like TurboTax or Taxfyle, especially for Indians residing in the US.
Taxes Can be Taxing!
There could be a lot of confusion surrounding income taxes, especially if you are a professional en route to making it big in the United States. However, with Advantage One Tax Consulting Inc., or AOTAX, you will get a complete idea of tax returns, planning, and more.
While tax assistance service providers may promise easy tax preparation without complications, not all are reliable and easy on the pocket. Here is where AOTAX becomes different from Turbotax and Taxfyle.
Rather than making promises of an all-encompassing service package, we curate dedicated human assistants to study your tax documents and check for discrepancies.
While technology fairs over the human brain, the latter does not fall into the many pitfalls that automated tools and calculators are prone to.
Why AOTAX Should Be Your Preferred Tax Partner in 2022
Read on to learn what sets AOTAX apart from other consultants:
1. AOTAX treats individuals and businesses alike
AOTAX is a wholesome service tax consultation company that prioritizes individual customers as much as we focus on businesses. Filing taxes and maintaining financial documents is as difficult for individuals as for small and big businesses. Therefore, AOTAX assigns qualified professionals to guide you through this hectic process.
As an NRI, you may find it exhausting to look through the nuances of tax filing in the US. Even if the country does not recognize you as a tax resident, you can file income tax returns as an employee in accordance with the provisions permitted by the firm you work for. Our professional team offers Tax Return services, ITIN Guidance, FBAR & FATCA Processing services, and more!
If it is payroll processing that your business is struggling with, like 35% of companies registered with the Electronic Federal Tax Payment System (EFTPS), AOTAX has got your back!
2. AOTAX is 100% online and manual checks for enhanced accuracy
AOTAX is specific about assigning individual experts to curate tax details for customers at the backend. Even though we offer a completely online interface to interact with you, your work would be done by expert human analysts – not automated software.
With the help of our professional team, you can easily file tax returns online as well. Starting from January 24, 2022, you can file tax returns online even if you are not a tax resident. You could qualify for a refund or tax credit later.
Filing taxes online is a more convenient option. Read about its convenience here. However, if you are doing it for the first time and have hesitance using such software, we advise you to consult our expert team, who can guide you through it all online.
3. AOTAX focuses on tax planning
Preparing taxes is a one-time job that occurs between January and April. It essentially analyzes many documents surrounding your income and investments, as well as retirement strategies. A Certified Public Accountant or CPA is responsible for preparing your taxes.
However, tax planning is a future-centric process that studies how to minimize taxes in succeeding years and prioritizes savings. Brands like Turbotax and Taxfyle often compromise this. Tax planning involves the analysis of your financial behavior to manage taxes and maximize returns.
At AOTAX, you can customize a personalized strategy for you and your business to improve your tax returns and invest wisely. In addition, AOTAX is a tax planning consultant that makes it a point to hold regular meetings at your convenience to help you chart your finances by your objectives, future aspirations, and values.
4. AOTAX doesn’t promise impossible returns
AOTAX is a practical tax planning partner. We focus on not pestering clients with unwanted upgrades and false promises. Perhaps the most nagging aspect of consultant agencies is offering recurrent and utopian promises, but we associate with clients transparently and plausibly.
Whether your business needs assistance or yourself, AOTAX can develop a comprehensive financial statement for you, encompassing a strategy for you to follow for maximum returns. If your business needs our service, we will represent you at tax audits and meetings to give it maximum exposure and successful leverage.
However, we don’t guarantee overnight miracles. Instead, we promise continuous assistance and complete confidentiality. Rather than presenting a common plan for every customer, AOTAX focuses on curating customized options for you according to your needs. This is how we differ from Turbotax and Taxfyle.
5. AOTAX offers audit defense and services
While many consultants do not have a standard tax audit service, AOTAX offers it as a standard among our many other packages. Take a look at our services that include financial planning and audit defense. If you are struggling under the weight of tax debt, AOTAX can offer resolutions to pick you up from your financial mayhem.
Our team takes into consideration your financial capabilities and constraints alike before designing a strategy for you and your business. We do not make it heavy on your pocket by asking for recurrent charges. Instead, our tax advisory service can mold a plan for your entire future, including your retirement.
Moreover, we don’t push for unwanted upgrades.
Choose us Today
From individual services to business strategies, AOTAX can be the savior you were in search of. Do not give in to the pressures of your host country, and reach out to us today. We will walk you through the details of everything tax-related in the US.
FBAR & FATCA Processing, ITIN Processing, Extension Filing, and Tax Return Services offered by AOTAX have abundantly secured the lives of many US-based Indians since 2003! This sets us apart from other consultancies that contain empty words and confusing workflows. We make it easy, convenient, and fast for you.
It is time for you to let go of complex and conventional tax solutions offered by firms like Turbotax and Taxfyle. AOTAX makes the process breezy!
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