US Residents, resident aliens living outside the US, and non-resident aliens residing in the US are subject to US income tax. Non-resident aliens are required to pay taxes only on income earned in the US. US citizens living abroad must report their worldwide income; however, some tax credits may apply.
Here are ten things to do before the IRS tax filing deadline:
File Your Taxes
File your taxes electronically through the IRS website, file a paper return, or hire a tax professional like a Certified Public Accountant (CPA), Enrolled Agent, or tax preparer to file for you. The key is to file on or before April 15th to avoid paying penalties.
Pay Any Taxes Owed or Establish a Payment Plan
If you owe the IRS money, it is best to establish a payment plan or pay what you owe as soon as possible. However, filing your taxes or an extension on or before the April 15th deadline is necessary, even if you owe the IRS money.
Filing an Extension
Form 4868 is The Application for an Automatic Extension of Time to File US Individual Income Tax Return is available on the IRS website. If you prefer a paper copy, one must be obtained from a tax professional. It is important to remember that filing an extension can provide more time to file a tax return; however, it does not extend the time required to pay any taxes owed. Interest and penalties are applied if the tax debt is unpaid by the original tax deadline.
Contribute to an IRA
Contributing to an IRA may lower your taxable income through deductions and potential eligible tax credits. Seek financial advice from a certified professional to explore IRA contributions and how they may help you as you file your taxes.
Review Your Withholdings
Review your tax withholdings periodically to ensure you pay the appropriate taxes with every paycheck. Your employer's payroll department can help you review and adjust your withholding on your W-4 as needed.
Claim Deductions or Credits
Tax deductions and credits may change the amount of taxes you owe, helping you pay less. Eligible credits can reduce what you owe and deductions and reduce your income amount before you calculate taxes owed. In other words, tax deductions can reduce taxable income, and tax credits can reduce your tax bill. There are eligibility requirements and tax rules when applying deductions or credits on your tax return. Seek help from a tax expert to find out what may apply to your situation.
Check for Errors
Check and double-check your tax return for errors. Making errors often causes delays in the processing of tax returns or potentially results in penalties.
Common tax return errors include
- Misspelling names.
- Entering the wrong social security number.
- Entering incorrect adjusted gross income (AGI) from the previous year or using an incorrect filing status.
Keeping your tax records organized and accessible is critical because your documentation will support what you entered on your tax forms. Income statements like W-2s and 1099's, social security documents, eligible expense receipts, and tax deduction records are necessary to file taxes. Keeping them organized using a filing system is more important than ever. The IRS recommends retaining records for at least three years from the date you filed; however, when performing audits, the IRS can go back six years and for any year where you failed to file a tax return or in the case of suspected fraud, there is no statute of limitations. Keeping organized records is essential in the US.
Plan for Next Year
As you work on your taxes for this year, you can plan for next year. Consider any financial adjustments you can make to reduce your tax liability.
Pay Estimated Taxes
Any income not subject to withholding will be taxed during your annual tax filing. Examples of income not subject to withholding from the IRS include interest income, dividends, self-employment income, IRA distributions, and capital gains. You can make estimated tax payments online through an account with the IRS. Paying estimated taxes helps you avoid surprises during tax time, avoid penalties, and will help you plan your cash flow throughout the year.
Every year the IRS tax deadline is April 15th unless April 15th falls on a weekend. This year, for example, April 15th, 2023, falls on a Saturday, making April 18th the deadline for filing federal income tax returns or applying for extensions.
Disclaimer: I am not a CPA or financial advisor. Please seek financial advice from a certified professional if you need help understanding how to file your taxes, pay taxes owed to the IRS, or need financial advice to proceed with tax filing or any other financial obligations.