8 Ways to Get Ready for Tax Season and Avoid a Back Tax Problem
The holidays are here. Not to be a grinch but right around the corner is a less fondly anticipated time of year. Before you know it, you will be taking down the Christmas tree, pulling down the holiday lights and getting ready for the tax season to come.
Tax season is decidedly less fun than holiday season, but the two times of year do have one thing in common. Just like the holidays, tax season requires lots of preparation and planning, and if you want to be ready, you need to start early.
Why are we writing this article? It's not to spoil your holiday cheer, it's because we've seen what it's like when you're not prepared. We help people who fall behind on their taxes and owe the IRS tens of thousands of dollars in back taxes, and it's often because they simply failed to prepare and they procrastinate on their taxes.
If you do get in trouble with the IRS and they claim you owe $10,000 or more, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem.
So if you don't want to end up owing the IRS a ton of money, Here are 10 ways to get ready for tax season and reduce your stress level as this annual ritual approaches.
#1 Organize your records.
Now is the time to drag out last year's tax return, pull out your most recent pay stub and get organized before the season starts.
#2 Settle any back taxes you might owe.
If you have years of unfiled returns or have a tax issue for anything besides the current year, you should get this handled now, before the upcoming tax season. When April 15th comes around, your tax professional is likely swamped with returns and they'll pay less attention to your back tax debt. We recommend reaching out to a specialized tax relief firm like ours who handles complicated tax debt cases all year round.
#3 Defer bonuses and incentive pay.
If you're going to owe taxes, it might make sense to defer getting paid so you can lower your taxable income. If you can, you might want to defer any bonuses and incentive payments. You can also defer payments from retirement accounts and IRAs to save on current-year taxes.
#4 Look for additional deductions.
Now is the time to make those last-minute donations to charity, so start writing those checks and gathering up those household goods. Be sure to get a receipt and save your cancelled checks so you can substantiate your charitable giving if a question should arise later.
#5 Expand your education.
Not only can taking a class improve your business or career prospects and help you get ahead, but that additional education could also lower your tax bill. You might qualify for a generous tax credit or take a good tax deduction for investing in your future.
#6 Up your retirement savings.
The end of the year is the perfect time to increase your 401(k) contributions and make your annual IRA investment. Maxing out your 401(k) and IRA contributions is one of the best ways to reduce your tax bill while saving for the future.
#7 Sell your losers and let your winners run.
if you have substantial capital gains in your stock portfolio or crypto portfolio, selling your losers could lower your tax bill. You can use those losses to offset your capital gains and save money on your taxes.
#8 Estimate your income for tax planning.
You will not know the exact amount of income you received until all your documents are in, but you can estimate your compensation and start doing some advance tax planning. This can be key in preventing back tax debt since you wont be blindsided by a large tax bill come April 15th.
Tax season will be here before you know it, and now is the time to get ready. You do not have to wait until April to start your tax planning, and the sooner you get started, the sooner you can put this unpleasant task behind you.
Need Tax Relief?
If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Operation Hidden Treasure: Cryptocurrency And Your Taxes
Cryptocurrency has become an incredibly popular way to invest, but the tax side of this virtual coin can be difficult to navigate. The IRS has gone back and forth over the years on it's stance on cryptocurrency, making it confusing even for the most diligent investors.
In March of 2021, the IRS announced Operation Hidden Treasure in order to crack down on cryptocurrency reporting. If you've bought and/or sold cryptocurrency recently, it's important to declare your crypto correctly on your tax forms in order to avoid fraud and evasion charges.
Here's what you need to know.
Before we jump into it, if you know you owe IRS back taxes on your crypto gains, it's important to reach out to a tax resolution firm like ours who is skilled in negotiating back tax debt with the IRS. We can help you file amended returns and get you back in compliance, while potentially negotiating with the IRS on your behalf. Contact us today for a consultation. [add your contact page link].
What Is Operation Hidden Treasure?
Operation Hidden Treasure is a joint effort by the IRS Civil Office of Fraud Enforcement and its Criminal Investigation Unit. This operation is designed to search for unreported income from cryptocurrency.
Operation Hidden Treasure has trained agents to examine the blockchain in order to find signs of tax evasion. Blockchain is the digital ledger that tracks your cryptocurrency mining and transactions. The signs that IRS agents look for are marked as signatures that make it easier to detect further fraudulent activity.
Crypto users have found ways to skirt reporting requirements by sending multiple transactions under a certain dollar amount, or pouring their virtual currency into shell corporations, different countries, and cold storage. The IRS is also collaborating with European law enforcement agencies to tackle international fraud.
How To Protect Your Assets
The IRS considers virtual currency to be property akin to gold, rather than money, and is taxed accordingly. If your only crypto transaction this year was purchasing crypto with US dollars, then that does not need to be reported, according to the IRS FAQ on their website. However, if you sold your crypto or you traded your crypto for any goods or services, then that does need to be reported.
When you sell your crypto, keep track of its value when you purchased it, and its value when you sold it. While crypto and the IRS can both be murky subjects, your transparency is the key to protecting your financial assets from future tax audits.
To get ready for the upcoming tax season, it's important to get your portfolio organized. If you have bought, sold, or traded crypto in the past year, contact a tax lawyer or a tax resolution firm like ours for advice on how to report your cryptocurrency transactions.
Need Tax Relief?
If you do get in trouble with the IRS and they claim you owe $10,000 or more, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem.