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Procrastinating on those taxes? You're not alone: 29% of Americans admit to waiting until the last minute to file. On top of that, 28% of Americans don't know that Tax Day 2024 is on April 15th (not April 18th). And another 8% of the U.S. population already knows that they'll be filing for an extension this year.
For many of us, tax preparation is likely (and understandably) not a favorite pastime. Still, like many other things we avoid in life, tax procrastination and anxiety likely stem from the unknown and not understanding the system.
Let's untangle some of this tax season stress the #TRN way with a calming breath and a look at the facts.
1. Embrace the Suck, and Grab a Latte
Tax preparation can feel like a massive undertaking, especially if you're down to the wire. Worst case scenario: you miss the deadline, owe back taxes, or may be subject to an IRS audit. But since there's no outrunning it, it's better to face the following steps and get back on track with a plan.
If you ran too close to the deadline or lost that copy of your W-2, file an extension and get reorganized. For more information on how to file an extension for your taxes, visit the IRS website here.
Tax Extensions and Audits
Every year, countless Americans set up short - or long-term - installment plans with the IRS, and most of the time, these are relatively straightforward agreements to set up. If you owe back taxes or want information on payment installment plans, visit the IRS website here.
Receive a notice from the IRS that you're being audited? Whether due to a simple math error or incomplete income reporting, it happens almost four times out of every 1,000 returns. For more information on audits and the process, go here.
2. Go Pro: Work With a Licensed Accountant
Are you thinking of avoiding tax time stress altogether by hiring a pro? We asked Destin Cobb, Partner and CPA with Carr, Riggs, & Ingram, for his take on when to consider seeking a professional tax preparer.
If you're a single earner with no dependents, one W-2 per year, and a few other financial complications to consider, your best bet may be to continue filing yourself for the time being. But as your financial landscape evolves, here are some signs you may want to consider hiring a professional to assist you:
You're self-employed, a business owner, a gig worker, a freelancer, or have multiple income sources outside of W-2 employment
You own rental properties
You hold significant assets or will need to make multiple itemized deductions
You've received an inheritance, cashed out a retirement account, had a baby, divorced, sold property, made a significant charitable contribution, or other major life changes that could affect your finances or income
You need to file income tax returns in more than one state
You invest heavily in Cryptocurrency
You've received notice from the IRS that you're going to be audited
You really, really hate doing your taxes, have trouble setting aside the time for it, or are prone to making errors when attempting to do them yourself
Cost Saving vs. Wealth Building
Just because you can do your taxes doesn't mean you have to. A qualified tax preparer can help you understand which deductions you're eligible for, knows how to calculate applicable expenses, and keeps relevant regulations or tax code changes at their fingertips. Hiring a pro could be well worth the cost and a better return on your investment if your time is better spent on other activities, especially income-producing ones.
"There's definitely a tipping point when it comes to filing your own returns" – Destin Cobb,CPA
Destin expands on that by saying, "There's a point when you may need to shift your mindset from just saving money or just saving on your taxes toward the strategies and long-term planning for the quality of life you want down the road."
3. Tax Season Stress Issues? Seek Tailored Services
And just as we all have different financial goals, there's no one-size-fits-all plan for your financial portfolio. Your tax and investment strategies should be tailored to you and the future you want to build. Whether you need an accountant well-versed in crypto, international commerce, or the gig economy, feel free to seek a specialist or ask plenty of questions.
4. Avoid Tax Season Scams
Whether or not you work with an experienced accountant on your taxes, it's critical to protect yourself from tax fraud and scams. In 2022, Americans reported nearly 7.8 million instances of suspicious activity related to tax filings or identity theft to the IRS. Some of the more common tactics involve scammers posing as the IRS or as legitimate tax preparers. Read on for more information and ensure that your personal information is protected.
IRS Scams
Scammers are getting better and more convincing than ever, rattling off badge numbers and maybe even name-dropping your local law enforcement agencies in their threats. The U.S. Department of Justice reminds us that the IRS does not discuss your personal or business tax issues via:
unsolicited email
text messages
social media
Generally speaking, whether it's regarding an audit, error, overdue tax bill, or other issues, the IRS will typically try to reach you by mail first. IRS employees may call to schedule an appointment or further discuss an audit with you, but only after attempting to send notice by mail first, often more than once.
Tax Preparer Scams
Scammers may target taxpayers with legitimate-looking phishing campaigns or convincing websites. "The site looks real," warns the Federal Trade Commission (FTC). "But it's set up to collect personal information that can be used to commit fraud, even identity theft."
Tax preparer red flags include:
Accepting payment only in the form of cash, prepaid debit cards, or gift cards
Asking you to sign blank or unfinished tax forms
Refusing to provide a Preparer Taxpayer Identification Number (PTIN)
Just as you would when hiring any professional, do your homework when hiring a tax preparer, which could include verifying their license and qualifications, searching for online reviews, or, in this case, verifying their listing in the IRS directory of qualified tax preparers.
Destin Cobb is a CPA and Partner at Carr, Riggs, and Ingram CPAs and Advisors (CRI), a Top 25 nationally ranked firm offering full-service, innovative consulting and advisory services to clients in all 50 states. He has over 18 years of experience and serves on several local boards. When he's not working, Destin enjoys permaculture gardening, river fishing, or folk music.
Want to be a part of the #TRN Team? We are looking for guest writers to contribute to our blog. Reach out to jo@trustedreferral.org to learn more.