6 Steps to Devise Income Tax Planning Strategies in 2020
Income Tax Return Preparation is a universal process for every citizen of USA. Every individual and business organization has to go through this process every fiscal year, as is required by the law. The Tax code is varied and applies to everyone differently, based on their circumstances. In fact, U.S. Tax Code is among the most complicated law codes written worldwide. There are many different categories, addendums, points and forms within the tax code. An ordinary citizen can go mad trying to understand it all. This difficulty in its understanding has given rise to income tax planning strategies.
Income tax planning strategies take different forms according to different practitioners and experts. A taxpayer can choose to do the tax preparation by him or herself. They can also take assistance from a dedicated service. If they choose to do it by themselves, they have the option of using a tax preparation software. However, there are plenty of dedicated services in the market who can prepare taxes for you online, or in person.
A licensed professional such as an attorney, a certified public accountant (CPA) can offer you their services for a fee. Or you can choose the help of a professional tax planning service. You must choose a service for income tax planning strategies which has plenty of experience. It must take responsibilities for its action, provides its clients with actionable opportunities and makes them aware of their rights. It must ensure no deadline is ever missed because of potential errors.
Steps to devise Income Tax Planning Strategies
A taxpayer’s job does not end by choosing a dedicated service and dumping all responsibility upon them. There is still some work you must do. Following are the steps you must go through to effectively prepare income tax planning strategies. You can devise them yourself or help the tax preparer do it on your behalf:
Choose a Tax Preparer
The first step in devising viable income tax planning strategies is deciding which tax preparation service should you choose. There are multiple factors that determine which service would suite you better. You must ensure the service you hire has a good reputation. See if its customers give it a positive feedback. Ensure that they have a Preparer Tax Identification Number (PTIN). If you can, choose to avoid using a firm with exceptionally high fees and standards. They are a waste of money. Moreover, you can gain the same level of service from cheaper firms who have a lot lesser red tape. Instead, choose an agency which offers lesser cost of income tax return 2020 preparation. Proximity is another issue if you are not using an Online service. Chose a tax return preparation service near me.
There is an online IRS directory where all the firms are sorted with their credentials and locations. You can check that directory out to choose the one most suitable for you. You can also use an income tax calculator there.
Gather Your Documents
Second part in devising incomes tax planning strategies would be gathering of documents. You should receive all the pertinent forms and documents from your employer, bank, brokerage firm or other
business partners. You should receive them by the end of January. The tax preparer will ensure the information in each document matches your private records. You must also do your part and recheck the information yourself as well so nothing is missed. Common forms in regard to tax preparation are;
I) Form W-2. It is for those who are employed on a job.
II) The various 1099 forms. It is to report extra income you might receive.
III) Form 1098. Its purpose is to report any mortgage interest.
IV) Form W-2G. This form is to report any gambling winnings.
Collecting the Receipts
Gathering of the receipts is done when the individual wishes to itemize his or her income tax deductions. Or go through the standard route. This option is given to all taxpayers by their tax preparation services. it is better to choose a route which grants greater write-off in terms of taxes.You must present all documents to the tax preparation service. Specifically, the documents pertaining to the income and expenses of your business. Better organized records take substantially lesser time for processing, which makes the whole process cheaper.
Provide your Personal Information
Any tax planning and preparation service requires your Social Security Number, including those of you claim as dependent. The addresses and important details of any properties you own or rent are also necessary. Any personal large-scale transaction with its details must also be provided. This is a crucial step in income tax planning strategies for individuals.
Requesting an Extension
Extension may become necessary if you fail to devise and act upon income or business tax planning strategies in 2020. An extension can be requested from the IRS to October 15 by the taxpayer. However, there is a provision attached to this extension. It directs the taxpayer to calculate and pay an estimated amount by April 15, or risk penalties. If there is an overpaid amount, it can be refunded later.
What to do with a Refund
A tax refund can be handled in various ways. Such as:
I) You can apply some or all of the refund toward next year's taxes.
II) You can receive it in a cheque or a deposit in your account.
III) You can contribute it to certain types of accounts such as, IRAs, Heath Savings, Education Savings. You can even buy Savings Bonds.
SG Inc. CPA is a Tax Return Preparation Service in Dallas, Texas. For over 15 years our employees have kept up with the constantly changing tax codes and times to keep our clients up to date with latest issues. We work hard to ensure maximum savings on part of our clients while making the tax returns timely and accurate. We put our knowledge, skills and experience on the line for our clients whether it be for their business or their family. We have your best interests at heart. Our income tax planning strategies are second to none.