How to file back taxes : Do’s and Don’ts

Tax day can be stressful. Whether you expect or owe a refund, it will be affecting your everyday activities. According to the car crash statistics of 30 years of National Highway Traffic Safety Administration, on Tax Day, fatal car crashes increase by 6 percent. Unfortunately, when you are stressed, you are capable of making mistakes. So, relax and consider the following Dos and Don’ts on how to file back taxes:

Dos

1. Filing the return or extension electronically

Not only this is a faster method of back taxes file or extension, but it is also more secure than filing one on paper. After you have filed electronically, you will get a notice from the IRS within 1 to 2 days on whether your return or extension has been accepted or rejected. According to the IRS, you will also be able to get your refund in just 7 days.

1. Paying the taxes through check/money order or direct bank transfer

In case you are preparing and filing your tax returns electronically, you can use the direct bank transfer for paying the owed taxes to the US Treasury. All you will have to do is enter your bank account information. After your tax payment has been submitted, the bank statement will have the US Treasury listed. Also, you will have an access code or a PIN to reference the transaction. Apart from the direct bank transfer, you can also use a credit or debit card for submitting the tax payment online. The IRS accepts American Express, Discover, MasterCard, and Visa. However, you will also be charged a convenience fee depending on the card and the payment amount.

The other option for paying your taxes is through money order or check in the mail. Your return will have a payment voucher containing instructions on submitting the payment to the IRS.

1. Using the extra time gotten through the extension for preparing and filing your returns wisely

When you get a tax extension, it gives you time for preparing and filing your tax returns. Do not use this time as an excuse for procrastinating on working on the taxes. Take advantage of this time. Figure out how you will be paying the owed taxes and filing the returns. However, remember that extension will not be giving you more time for paying your taxes. This is an important factor for taxpayers who still have to learn how to file back taxes.

1. Take your time

Make sure that all the information that you have entered is complete and accurate before you file back taxes. This includes your personal information, routing, values, and account details for refund’s direct deposit, etc. Also, you can get the help of professionals if you don’t know how to file back taxes.

1. Keep all documents for at least 3 years

Once you are done with the back taxes file, make a copy of the signed returns. This includes schedules and tax documentation like W-2s. So, if the IRS sends you a notice, you will have all the documentation that they requested.

Don’ts

1. Not filing for an extension or a tax return because you can’t pay your taxes

Even if you can’t afford to pay your taxes right now, always file back taxes. For the IRS, not paying on time and not having the back taxes file are two separate issues. The agency will be issuing a penalty for both of them. When you have filed your tax returns, you have multiple options for paying the taxes you owe. You can make an installment agreement with the IRS where you will be making standard, agreed-upon monthly payments. You can even temporarily delay paying or apply for an offer in compromise. Whichever option you choose, first you have to contact the IRS immediately and let them know that you can’t pay.

1. Reporting false information on the returns for getting a bigger refund or not paying what you owe

You absolutely should not report tax credits you don’t qualify for or report income that does not exist. It is a crime to lie on your tax forms. Even if you are not charged for tax fraud, the IRS will be tracking behaviors that will be eventually flagged. It will lead to a hefty tax bill, increase the audit risk, and slow down the future refunds’ processing. So, if you can’t pay your taxes right now, file the returns and look into a suitable payment option. 

1. Paying your taxes with a credit card

Now, this might be a better way to pay your taxes than not paying at all. However, before you do this, you should look into other ways through which you can borrow money. You can take a personal loan from a credit union or a bank. Compare the interest rates of these with that of your credit card. The end game is to lose the least amount of money in the form of interest. Once you have taken the loan, pay it off as soon as possible. Also, make sure that you are not in the same situation next year. For example, for paying your taxes on time, put aside some money in a savings account for each pay period or adjust the withholding with your employer on the W-4.

1. Not saving the receipts

If you have made any charitable contributions over the year, you have to keep a record of this. This can be a credit card statement, a bank statement, a canceled check, etc., made to the charity. It should contain the date, amount of the contribution and the charitable organization’s name. If you don’t have the documentation, you won’t be able to make a claim. For cash donations of less than $250, you will have to provide bank records for proving the donation or written communication from the organization. For a cash donation of more than $250, you will need written acknowledgment from the organization. In case you are donating household items, make sure that they are in good condition, otherwise, the IRS won’t consider them as tax deductions.

1. Waiting until the last minute to file

When you are waiting for the last minute to file back taxes, you are more likely to make mistakes. So, over the year, keep your documents collected and organized to save time and avoid mistakes on filing your tax returns.

For getting the best guidance on how to file back taxes, you need to get the help of professionals. To Tax Defenders is a tax resolution service that has been helping taxpayers with back taxes file since 2011. We have a team of experienced and qualified tax professionals who can guide you through any tax-related issue and help you learn how to file back taxes. Call us for a free consultation today!