The New Year is here with a promise of new beginnings—here are five resolutions every taxpayer should make this year:
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I will check with my accountant if I have a major life change this year. Events like marriage, divorce, purchase of a home, refinance, sale or other disposition of a home, becoming self-employed or changing jobs, should all be reported to your financial pro.
There’s nothing worse than going in at tax season only to find out you could have saved yourself some money by structuring these changes in a way that would benefit you tax wise.
I will pull my head out of the sand. Don’t make the IRS angry by ignoring them. If you owe back taxes, you will be surprised at how simple it can be to resolve the situation.
You may qualify to be deemed uncollectible or qualify for a reduction of the liability through the IRS’ offer in compromise program. Perhaps you need only set up an installment agreement. If you haven’t filed prior year tax returns and need to do so, now is the time. The IRS happily accepts prodigal sons (and daughters) back into the fold. You may fear that filing will draw unwanted attention to yourself. Don’t be scared. It will be a lot better than looking over your shoulder.
If you come forward and honestly report prior year income and deductions, the IRS will be more than happy to work with you. If it still feels like too daunting of a task, hire a tax professional to sort out the problem. When you sign IRS Form 2848 Power of Attorney, you give your tax pro the ability to represent you and you need never speak to an IRS agent. There may also be reasonable cause to have penalties abated. Check with a tax pro.
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I will make my estimated tax payments. If you have sources of income that do not provide withholding of income taxes, you may be subject to payment of estimated taxes. These are due quarterly. For 2012 they are due on April 17, June 15, Sept. 17 and the final installment is due Jan. 15, 2013. Calendar these dates so you do not forget.
I will become savvier about tax law. Tax law changes every 20 minutes or so it seems. Learning about tax law is beneficial to every taxpayer. There are ways to structure your income and deductions to benefit your situation. There are credits that are often overlooked. If you have questions about tax law, you can access the IRS’ website to find answers. Simply go to www.irs.gov or contact a tax pro.
I will get organized. Start your 2012 income tax file right now, and throughout the year put in receipts and paperwork for transactions that will be reflected on your tax return. You’ll find that getting ready for tax season will be less stressful if you do it as you go along.
If you have not created your 2011 income tax file yet, do so now. File those important tax documents that arrive between now and the beginning of February in your 2011 tax file. All you’ll need to add are your own receipts and documents for deductions and other income you are declaring.
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know.” Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.