In many cases, doing your taxes involves nothing more than copying information from one form to another. In fact, computer software programs will help you import information from a W-2 or a Form 1099 just by taking a picture of it. However, not all tax returns are straightforward. What are some things that can make your tax situation more complicated than usual?
You Run a Business
Whether you are a sole proprietor or run a corporate entity, you will have to file a business return in addition to a personal return. You may also be on the hook for establishing an EIN as well as withhold income taxes for employees. If you work with independent contractors, you will have to make sure to send them Form 1099s if they made more than $600 in a year.
You Decide to Itemize Your Deductions
While you may be entitled to a larger refund by itemizing your deductions, it does require that you keep your receipts and other documentation related to the deduction. Without proper verification that you in fact have a mortgage that you paid interest on or qualify for deductions related to retirement savings, those deductions could be eliminated through an IRS audit.
You Get Healthcare Through a State or Federal Exchange
The Affordable Care Act made it mandatory for most Americans to have health care. If you get your policy through an exchange, you must document that when you file your income tax return. This means waiting for a tax form from the marketplace where you got your policy, which could take a few weeks after the new year begins. If you like to file your taxes right away, you won’t be able to do so without this paperwork.
You Didn’t Pay Estimated Taxes Throughout the Year
If you are self-employed, you are responsible for paying your own income and FICA taxes throughout the year. Failing to do so could result in addition penalties, interest and a fine. However, you will pay no penalty if your overall tax burden is less than $1,000 or you paid at least 90 percent of your tax burden from the previous year.
You Paid or Filed Your Income Tax Late
Taxpayers have the right to ask for a six-month extension to file their taxes. For instance, if you were filing your personal income tax, you would have to file by April 15. However, if you get an extension, you won’t have to pay until October 15. While you have extra time to file, you don’t have extra time to pay. You will pay an additional .25 percent per month on any amount that wasn’t paid on time up to 25 percent. Failing to file on time may result in a five percent penalty up to 25 percent for each month that you failed to file.
It is important that you file your taxes in a timely and accurate manner each year. If you have a complicated tax situation, it may be a good idea to talk to a CPA or a tax professional who understands your situation and how to proceed. Otherwise, it is important that you know where to go to get help for your questions before you file as opposed to after you receive an audit.