The inevitable cycle of tax prep season comes upon taxpayers each year. Before spending time preparing a return you need to know the basics. Here are some tips to help make sense of income tax return filing requirements.
Do You Need to File?
Before submitting an income tax return be sure to find out if you have income that is subject to tax. Filing requirements vary with your age, filing status, and gross income. Single persons under age 65, for example, must file if gross earnings are at least $9,350. For the 2010 filing season, others who must file a tax return include self-employed persons with earnings of at least $400 and church-employees with earnings of at least $108.28.
So you need to file. Now What?
The tax filing season officially kicks off in January but submitting returns too early can cause them to be incomplete. For example, if you performed contract work this year then your clients may issue a 1099 for payments made to you. If the statements do not arrive before you file it can cause underreporting of income and owing taxes. The best option is to confirm that the income on your books match the 1099’s reported to the IRS. While waiting for tax statements to arrive, stay ahead of the game with good record-keeping. Although income tax forms and tax preparation software will be available at year-end, you must wait for the official opening of tax season to submit the return. You can check the date by visiting the Internal Revenue Service’s website.
How long do you have before the return is due?
The last date to submit an income tax return varies with the type of income tax that you are reporting. If you are filing an individual income tax return then your filing due date is April each year.
What if you’re not ready by the tax due date?
There are a number of reasons why people wait to file their income tax returns. Some find the process a pain because it involves lots of record-keeping and preparation time for filing. Others delay doing their taxes because they anticipate owing and cannot pay the tax bill. In either case, if you will miss the filing due date and owe taxes consider applying for a filing extension. This provides more time to prepare and make arrangements to pay your balance.
For more useful tax advice sign up for my free financial newsletter and tax due date reminders here.