Do not worry in case you committed an error on your taxes?

by Mounica Kota | Sep 12, 2017 | Tax Preparation

Do not worry in case you committed an error on your taxes?

Do not worry in case you committed an error on your taxes? It is a typical event during tax season filing to find that you messed up a formerly filed return. Here is what you have to know.

Amended return fundamentals

The best thing to note is that you ought not to endeavor to amend the circumstance by filing another original return Form. That will simply confound the IRS and cause cerebral pains for you. Instead, make sure to record a shape, even In case you are amending a year return that was filed just some days back.
The discount circumstance amending the return will deliver a tax refund; the deadline for filing structure is the later of:

Three years of the return for the year being talked about was filed.
Two years after the tax for the year was paid. In many cases, the three-year law is the one to focus on.

In case you filed your Form before the deadline, you are taken to have filed the return for work of the three-year rule. However in case you extended the return, you are regarded as having filed on the earlier of the real filing date extended due date. However, the quick you document the amended return, the sooner you will get your discount. So do not wait!

Tax due circumstance

This is a trickier scenario. In case you now know you downplayed your tax responsibility on the Form, you are required to document an amended or return and pay the additional tax. In case you do not, and the IRS discovers the mistake, the government will charge you for:

The unpaid tax sum in addition to interest
The additional inability-to-pay interest charge punishment
Perhaps different penalties as well.

But the IRS can waive penalties In case you show you had a sensible cause for the under- payment. For instance, you might have sensible cause In case you depended in bad guidance from a paid tax proficient or got incorrect information from an outsider. Likewise comprehend this: The IRS, by and large, has three years after the date the inventive return was filed to find mistakes and omissions and evaluate additional tax and penalties. This is the purported three-year law of rules. However, a six-year state of rule applies In case the original return down-played net income by more than 35%. There is no state of limitations on a fraudulent return.

Conclusion

In case the original return downplayed your tax charge by just a relatively little sum, you ought to most likely pay the Feds In the case for no other explanation than to pay your conscience. But In case there was an expansive modest representation of the truth, this is a group of worms you do not have any desire to open before thoughtful every one of the outcomes including the likelihood that your well-disposed state income tax authority will get into the demonstration. Consider employing a tax professional with involvement in production with past-due tax issues. Optimistically, you can get free with minimal or no penalties. But be set up to pay in any event the past-due tax in addition to interest.

7 Tips to Get Bigger Tax Refund for Your 2017 Tax Year!

by Mounica Kota | Aug 11, 2017 | Tax Planning, Tax Preparation

7 Tips to Get Bigger Tax Refund for Your 2017 Tax Year!

Most of us consider tax season to be a burden that should somehow just vanish from the calendar. But there are enough statics and data showing that more than 80% people who file for tax returns receive refunds. And the average refund is about $3000. Here are a few effective ways to boost that tax refund even further up.

Proper utilization of Deductions

Most of us do opt for the standard deductions. But if you itemize your deductions and take lots of them, there are chances of higher refunds. If you haven’t already done that, now is probably the best time to do that. But if you have been through that and don’t see any deductions at hand, see if you can prepone some deductions. That donation you had planned for later in the year, do it within the tax season. This will allow you to claim that for tax refund. There are several deductions that might be applicable for you,

Retirement Planning

Funding your retirement with the help of IRA and/or 401(K) allows for bigger tax deductions from your income. This results in lower tax and also higher refunds. Though there is nothing wrong with traditional methods, there is an alternative in the form of Roth IRA and Roth 401(K). Though you do not stand to benefit from immediate tax benefits of bigger refunds, you do get a chance to withdraw retirement funds as tax-free.

Make the most of mortgage

With the constant fluctuations in the interest rates, refinancing your mortgage can turn out to be a good option. In the initial days of your mortgage repayment, majority of your installments goes in as interest. Look for options that will help you reduce the interest rate. It becomes a win-win situation for you, as you can look for better tax benefits and lower interest rates.

W4 Form

Filling up of the W4 form during job initiation is quite a familiar scene. The calculation for amount to be withheld for tax depends on what you fill the W4 with. Higher the claims you make, lower will be the withheld amount. You do get the flexibility of choosing your claims and also updating the form at different times. For a bigger tax refund, claim lower allowances up front and update the W4 form later on to your finance department.

Filing Status

The amount of your tax refund depends on your filing status as well. You should not select the filing status based on assumptions alone. Certain filing statuses allow for much better tax rates and thus higher deductions. For example, single parents or individuals who support dependents qualify for Head of household, which has favorable tax benefits. Similarly assess your situation if you are married. Filing tax returns together or separately would have their own pros and cons. Filing it together leads to higher tax refunds, but it largely depends on your case.

Work from home benefits

If you are someone who works from home a lot, there are bunch of ways to get bigger tax refunds. If you have a dedicated place in your house for work, you can claim up to a quarter of the annual rent. Along with it utility bills, other expenses such as office supplies, travels, advertising costs etc. would also qualify for tax deductions.

Utilizing the credits

Earned income tax credit is a great way for increasing the tax refunds. In fact, they work more efficiently than deductions. It is worth taking sometime to see if you are eligible and can include the same. Every credit dollar that you earn helps in bringing down the taxes by one dollar.

A tax refund has the capability of doubling up as a saving scheme. If you haven’t been able to save much during a financial year, optimizing your tax returns can help you get a fat refund. Once you have that refund, you can utilize it for investing or for anything else as well.

All you Need to Know About ITIN

by Mounica Kota | May 28, 2017 | Tax Planning, Tax Preparation

All you Need to Know About ITIN

Taxation, or the levying of tax is an important part of every nation’s economic scenario as it is one of the major sources of revenue for a Government. While salaried individuals get their salaries after deduction of the relevant tax, self-employed individuals have to file their tax returns themselves. US is a racially diverse country where individuals of various nationalities co-exist. While majority of US citizens qualify for a Social Security Number, many, who are either dependent spouse of US citizens or non-residents, are not eligible to avail the Social Security Number (SSN). When such individuals, who do not have a SSN, have federal tax filing requirements, they require an Individual Taxpayer Identification Number (ITIN) for the same. So, what is an ITIN?

As is evident from the name, ITIN is a number which is allotted to individuals who wish to file their taxes with the US Government.

This number is unique and is issued by the Internal Revenue Service (IRS).

The number acts as the taxpayer’s identification number and is a 9-digit number starting with 9. Who can avail an ITIN?

The Individual Taxpayer Identification number is issued to individuals who are not qualified to obtain a Social Security Number but have to report their taxes. The individuals who are eligible to avail an ITIN are:

The spouse or dependent of a US citizen or US resident who is a citizen of another country.
The spouse or dependent of a non-resident US Visa holder
A non-resident who has a source of income in US and thus has to file taxes in US
Other US citizens who are not qualified to avail a SSN but have to file their taxes in the US

Spouses and dependents of US citizens, residents or non-residents need an ITIN for being named as a dependent in the taxpayer’s tax returns.

So, individuals not having a SSN who are required to file their taxes have to avail an ITIN for the purpose of tax filing and processing. SSN and ITIN are mutually exclusive. An individual having a SSN cannot have an ITIN and vice-versa.

How to avail an ITIN?

The Internal revenue Service (IRS) is the authority which issues the unique ITIN to every individual.

For applying and availing an ITIN, individuals can either apply directly to the IRS or through the Certified Accepted Agents (CAAs) who are authorized to process the applications for issuing the ITIN.

The application form (W-7) is available online which should be downloaded and duly filled. The hard copy of the form, a valid Passport and other relevant documents are to be mailed to IRS for availing the ITIN. If the form is sent directly to the IRS, the original supporting documents are required to be mailed along with the form. However, if one is engaging the services of any CAA, the form and copies of the supporting documents would suffice. After processing, the ITIN is sent through mail within 7 weeks.

Limitations of an ITIN

Though the ITIN is required for filing tax, there are certain limitations associated with it which are as follows:

The Earned Income Tax Credit cannot be claimed using an ITIN as it requires a valid SSN.
The holder of an ITIN cannot avail a SSN.
The ITIN is solely for the purpose of federal tax filing and cannot be used elsewhere.
The ITIN could not authorize the individual to work in the US.

Benefits of ITIN

Despite its limitations, ITIN also has some benefits which are enumerated below:

For claiming a tax refund, the ITIN is required
To name any family member as a dependent in the taxpayer’s returns, the member’s ITIN is required.
It is a legal requirement for tax-filing for individuals not having a SSN.

Validity of an ITIN

As per changed laws and regulations,

the Individual Taxpayer Identification Number (ITIN) is valid for 5 years after it is issued.

ITINs issued before 2013 would expire in 2016 and individuals who wish to file their taxes in 2017 would have to renew the same. Furthermore, ITINs on which no tax filing has been done in the last 3 years would also become invalid and need renewal to file taxes in the next year.

So, an ITIN is an important requirement for every individual filing tax in the US who does not have a SSN. Now you know all about the ITIN and the next time you have to file your taxes, you would know exactly what would be required.

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