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Tax Filing Benefits, Documents, and Software Options

The Internal Revenue Service (IRS) administers and enforces the country’s tax laws. Most citizens and permanent residents who work in the country need to file tax returns if they earn above a specific income bracket. You can undertake tax filing with the help of a software or by hiring a tax consultant. Either way, it is crucial to be aware of the dates of tax-filing season and the mandatory requirements for the process.

Benefits of tax filing

Tax filing is not just a legal and administrative requirement but is also for the taxpayer’s benefit. Let us look at the benefits of filing your taxes accurately and on time.

Get refunds as savings

In some cases, individuals overpay their taxes in the year, getting refunds as a lump sum. This can be used to pay off loans, boost a nest egg, or invest elsewhere.

Avoid penalties

There can be four reasons why the IRS can serve one with a tax penalty notice. In case the returns are not filed on time, if the tax owed is not paid accurately, if accurate tax returns are not prepared, if accurate information returns are not provided. The penalty levied is 0.5% of the tax amount owed. The penalty won’t exceed 25% of the unpaid taxes.

Avoid accumulated interest payments

If both late filing and late payment penalties are levied, the accumulated amount can increase to quite a bit, and so can the interest accrued on them. To avoid such accumulated fines, it is necessary to file accurate taxes on time.

Better credit score

If late filing and late payment penalties are levied, the IRS keeps track of the same. Such a record can have a negative impact on your credit score and make it difficult for you to get loans. On the contrary, a good record implies a good credit score and thus easier loan access.

Irrespective of the method you choose to file your taxes, be it using the help of an expert or using a tax preparation software, the undermentioned must be produced to file taxes:

Essential documents for tax filing

Identity documents

You will have to declare your identity and that of your dependents according to the Social Security cards. Keep details like your name, date of birth, social security number, and those of your spouse and all your dependents handy.

Form W-2

It is the form that one receives from their employer. The W-2 form reflects the income and the taxes paid by the employer on your behalf. It also reports the state and local taxes that you have already paid.

Self-employment and business records

If you are self-employed, you need to show that and also claim business expenses to lower your taxable income. You will need forms 1099-NEC or 1099-K, documentation for your home office expenses, and records of expenses incurred due to the business. Furthermore, while filing taxes, you will need Form 1099 INT that you would get from your bank or your registered financial organization if the interest earned in the financial year is more than $10.

Aside from the documents mentioned above, you will have to keep your retirement contribution records handy. In addition, if you have a mortgage, then the record of the mortgage interest; if not, you will need a record of the property taxes. You will also need any communication from the IRS, information about your deductions, and tax credits.

Tax preparation software

One may find tax filing tedious and hiring an expert tax consultant too expensive. A middle ground of cost and work efficiency can be arrived at by using tax preparation and filing software, where you can enter the details, and the software will take care of everything else.

TurboTax®

It is an extremely comprehensive tax preparation software. It has various products and plans for individuals filing taxes by themselves and four plans if you take the help of its experts. The Basic Plan is priced at $79, the Deluxe Plan is priced at $119, the Premier Plan costs $179, and the Self-Employed Plan costs $199. TurboTax® guarantees a 100% accurate calculation guarantee and a maximum refund guarantee.

TaxSlayer®

TaxSlayer® is another tax filing software that offers multiple plans according to the complexity of the tax filing process. It has five plans, namely Simply Free, Classic, Premium, Military, and Self-Employed, the costs of which are $0, $29.95, $49.95, $0, and $59.95, respectively. While the Simply Free edition includes state taxes, the other plans charge a nominal additional amount for the same. For those who find tax preparation software insufficient, the TaxSlayer® Premium Plan is a great product, for one can consult a tax expert by live chat, calls, and emails.

Cash App Taxes

It is one of the most efficient free tax preparation software for filing Federal and State taxes and returns. They guarantee 100% accurate tax filing without any hidden fees or surcharges.

The IRS department keeps on increasing awareness about timely and accurate tax filing so that one stays cushioned against the penalties that are levied on late filing and payment. Also, with several efficient and comprehensive tax preparation software, filing taxes has become quicker and easier.

Disclaimer:

The information available on this website is a compilation of research, available data, expert advice, and statistics. However, the information in the articles may vary depending on what specific individuals or financial institutions will have to offer. The information on the website may not remain relevant due to changing financial scenarios; and so, we would like to inform readers that we are not accountable for varying opinions or inaccuracies. The ideas and suggestions covered on the website are solely those of the website teams, and it is recommended that advice from a financial professional be considered before making any decisions.

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