The tax season is here in all its magnanimity and everywhere people can be seen fumbled, perplexed, and a little overwhelmed regarding the many nuances that there are when filing taxes. The tax blues seem to be looming upon everyone. Even though the tax advisors, professionals and SMB owners take due tax practices with much sincerity, still some nooks and crannies are left untouched or seem difficult to deal with at the very penultimate time. Knowing the possible difficulties that might arise during the tax season beforehand, would help the tax filers and tax professionals be better prepared for the D day.
1. Constantly changing tax rules and laws
It has become a common thing for the tax rules and laws to be changed and altered almost every year or so. Claus are added and removed as the authorities find fit. All of this just leaves the common consumer in an even more confused state. It’s not feasible for the common public to be up and running with every little nitty-gritty that the authorities alter. Tax professionals need to be on top of the changes being made in tax laws in order to avoid last-minute hassles and amp-up tax savings for their clients.
The best and the most reliable source to stay updated on the changing tax laws is Internal Revenue Service (IRS), as it is the enforcing organization for these laws. You can also check out our series of blogs for the recent tax changes and updates. There are a number of webinars and professional organizations that solely deal with such changes. You can always use the internet for the help you need.
2. Tax Filing Errors
Even a minute mistake or lack of vigilance may end up costing you your precious time and facing penalties. Error in filing the tax returns can lead to an IRS audit, refund delays or even penalties. Reports have shown that the error rate of electronically filed tax vs paper-filed tax returns are 0.5% vs 21% respectively.
Thus we see that electronic filing of taxes can be a lot more beneficial while producing the least amount of error. Apart from this, carefully reading all of the IRS instructions is an absolute must along with utmost vigilance when dealing with calculations, signatures, and personal data.
3. Incompetent or Incomplete Documentation
Fumbling and finding one’s self amidst a pool of documents and receipts while meeting deadlines during the tax season is something that we’ve all been through at least once. I think that I speak for everyone when I say that all of us wish to avoid this situation.
The whole tax filing process could go by a lot smoother if all the essential documents required for tax filing are prepared well ahead in time. Staying organized and maintaining a folder for all the required documents like income statements, business expenditure receipts, previous financial year’s tax returns details, etc. It should be kept in mind that, a major chunk of business expenditures and charity donations are eligible for tax deductions, and due diligence should be paid to such details, in order to harvest maximum benefits out of it.
4. Security of tax information
Security and data breach was found to be at an alarming rate in 2019. Tax professionals stand in possession of some of the most sensitive data of their client’s business transactions and income history. Even a minuscule malicious activity might end up causing huge fallbacks on the taxpayer as well as their tax advisors.
Having to protect the taxpayer’s data is not only an ethical business practice but also a legal obligation for tax professionals.
One of the most reliable ways to practice data protection and top-notch security is to get cloud hosting. Cloud hosting your preferred tax and accounting software ensures that there is proper back up of the client’s data and undenied round the clock access. All of this gives you, as a tax professional, a lot more accuracy and extra time to work. Please remember to be careful of the phishing mail and stay updated with warnings issued by the IRS.
5. Scrutinizing Amended Returns
The tax returns that are filed in the current financial year, in order to compensate for the previous year’s errors is known as an amended return. Amended returns are used to correct errors and claim refunds for the previous year’s filings.
In order to avoid any hassle, please compile all of your data in one place before starting off the tax filing process. This would save you from panicking at the very last moment. If there still persists a scenario where you find yourself confused, it is advised that you take professional help and supervision.
Tax filing might as well be a daunting and demanding process, but as noble citizens, it is our duty to go about this tax filing process with due diligence and authenticity. The solutions to these problems mentioned above regarding the tax season would surely help tax professionals as well as tax preparers. If you manage your time and documentation well, it will help you in banishing post-tax season stress. Practice what’s recommended and the tax season would be more of a cakewalk than a rough ride!