Tax season is here and if you’re dreading filing your income taxes or dealing with the IRS, you’re not alone.
The IRS audited 1.6 million taxpayers in 2011 and the thought of an audit – among other worries – can fill even the calmest person with fear and anxiety.
But there’s no need to stress out about handling your income taxes and staying on Uncle Sam’s good side.
Here are 5 tips to solve your biggest tax worries:
Tip #1: Get an IRS Extension
If you’re worried about not being able to file your taxes on time, it’s actually not that big a deal. By law, if you’re unable to meet the April tax-filing deadline, simply request a tax filing extension. It’s easy enough to do by filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return and can get an automatic six-month extension of time to file when the application is accepted.
Tip #2: Set up an Installment Agreement
If you’re worried that you owe more taxes than you can afford to pay right now, don’t let that stop you from filing your taxes as required by law. You have three options when money’s tight and you can’t pay your taxes immediately.
To ask for more time to pay, initiate a request through the Online Payment Agreement process or call the IRS at 800-829-1040. You’ll pay the least amount in interest and penalties if you set up a 30 to 120-day extension. You can also set up an installment agreement online. And, of course, the IRS accepts American Express, MasterCard, Visa or Discover credit cards as payments too.
Tip #3: Review your taxes for accuracy
Plenty of people live in mortal fear of getting audited by the IRS. If this is your worry, you really should set those fears aside.
As long as you aren’t doing anything illegal, like fabricating expenses or hiding income, the worst that can happen is that you get audited and you show the IRS your records that support your claims.
It’s not like the IRS is just going to pop up on your doorstep at your home or job. They will send you a letter if they plan to audit you. And then you’ll have a chance to gather all your documentation and also review things with an accountant or tax professional.
Tip #4: Get your documents together
Is your big concern that you don’t have all your financial paperwork together? While it’s always best to have documented proof of expenses, there are some things where you can show the IRS that you made reasonable expenditures and that will be acceptable to the IRS.
For example, if you plan on taking some deductions for certain items such as travel expenses or meals, you can use the “per diem” rate to calculate your total costs. Also, you may be able to re-create certain records. Or you may not have receipts, but perhaps you have a record of expenses that were billed to your credit card.
Tip #5: Don’t be afraid to talk to the IRS
If you’re worried about the prospect of the IRS slapping you with a tax lien, recognize that there’s an entire months-long process involved before things ever get that serious. And even when the IRS does issue a tax lien, they’ll typically tell you about it before they take that step.
A federal tax lien is a legal claim to your property, including any property you acquire after the lien arises. This kind of lien is a public record and can mar your credit rating too. The best strategy here is to work out a deal with the IRS. Instead of ducking letters or not replying to correspondences, address your situation head on by calling the IRS at 800-829-1040 to discuss your options.