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Income Tax Filing — What You Should Know

Income Tax FilingThe April 15th tax deadline always seems just around the corner. Preparing in advance to file your federal income tax return might help make a sometimes overwhelming process easier to tackle. Fortunately, the Internal Revenue Service (IRS) has established several convenient methods to help each taxpayer file promptly and with ease.

Electronic Filing (E-File)

Since computers have become a part of everyday life, the IRS has implemented several filing methods known collectively as e-file. Whether you use your personal computer or a tax preparer, you may now electronically submit your federal income tax returns to the IRS. The following are your e-file options:

Using Your Computer

There are numerous tax planning computer software programs available that can help take some of the mystery and mathematical headaches out of income tax return preparation. These easy-to-use, menu-driven programs prompt you to input tax information directly from your tax forms and records. Software to file your income taxes is available, generally at a low cost. A list of companies “tested and approved by the IRS” is available on their website, www.irs.gov.

Note: Individuals “can choose to file a completely paperless tax return by using a self-selected PIN. With a self-selected PIN (Personal Identification Number), there is no paper signature document to send in.”

Using a Tax Preparer

This method allows individuals to file their federal income tax returns electronically (including the use of a self-selected PIN in place of a signature), but still with the assistance of a tax preparer. “Authorized IRS e-file Providers (EROs)” are tax preparers with the ability and authority to file electronically. For a complete list of EROs, visit the IRS online at the web address previously provided.

Income Tax FilingLate Filers

Some individuals have complex tax planning issues that may require additional time to sort through. If you will be unable to complete your tax return by the April 15th deadline, an automatic extension of four months beyond April 15th may be granted for filing a return (but not for payment of tax), provided that Form 4868 is properly filed and accompanied by payment of the estimated tax owed for the year. No late payment penalty will be imposed if 1) the tax paid with Form 4868 is at least 90% of the total tax due with Form 1040, and 2) the remaining unpaid balance is paid with the completed return within the extension period. However, if the amount of tax included with the extension request is insufficient to cover the taxpayer’s liability, interest will be charged on the overdue amount, including other penalties.

If you expect to owe taxes and are concerned that you may be unable to make a full payment to the IRS by the April 15th deadline, it is important that you at least make a partial payment when it comes time to file your tax return. Include a letter explaining your situation and then immediately contact your local IRS office. In future years, keep in mind that early filing results in quicker refunds from the IRS and tends to eliminate the frustrations that are typically experienced by late filers (e.g., obtaining answers to last-minute questions, searching for additional forms, etc.).

Other Important Topics

Maintaining Your Tax Records. Generally, the IRS has up to three years to conduct an audit, either randomly or based on a questionable return. However, if income is misstated by 25% or more, the IRS has up to six years to enact an audit (there is no limitation if the IRS suspects fraud). Thus, it is generally wise to hold on to your tax records (tax returns, W-2s, other forms, etc.) for six years.

Questions for the IRS. If you seek answers to some frequently asked questions, call the IRS Tele-Tax service line at 1-800-829-4477, where you can find pre-recorded messages covering more than 100 tax topics. Also, you can check the status of your refund through the IRS website. You will need to provide your Social Security number, your filing status, and your refund amount.

Seeking Professional Assistance. One question frequently asked by taxpayers is whether to prepare one’s own return or seek out a tax return preparer. Some taxpayers may be uncomfortable preparing their own returns because of complex schedules (e.g., Schedule C for self-employed business expenses) or tax issues (e.g., capital losses carried over from a previous tax year, complicated deductions, etc.). If you fall into this category, you may wish to consult with a qualified tax professional.

Taking the time now to prepare and file your return will certainly help make this and future tax seasons much more relaxing and stress free!

 

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The Meritrust Team is excited to get to know you. We are a Louisville, Kentucky based company, but we work with clients from all across the country. Please get in touch so we can work together on your financial dreams.

John Kallis

MBA, JD

Financial Advisor

Direct: (502) 882-4612

Frank Hill

CFP®

Senior Wealth Manager

Direct: (502) 882-4603

Tom Furlong

Financial Advisor

Direct: (502) 882-4605

Marcia Cammack

CPA

Financial Advisor

Direct: (502) 882-4606

Nathan McNulty

MBA, CFP®

Financial Consultant

Direct: (502) 882-4608

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Meritrust Wealth Management
2600 Meidinger Tower
462 South Fourth Street
Louisville, KY 40202
Phone: (502) 882-4600
Fax: (502) 882-4601
info@meritrustwm.com