May 11, 2022
Do you have back taxes that have been lingering at the forefront of your mind for years? If that’s true, there’s no better time to manage them than now. Don’t let another year pass you by without taking responsibility for your tax circumstances. Fortunately, there are plenty of hassle-free options available for those who need to file back taxes.
Continue reading to learn what you need to know about filing back taxes, including why it’s a smart idea, when you can do it, and how to get it done.
Although tax season 2022 has come and gone, it might not be too late to file last year’s taxes. In fact, you may still be eligible to file taxes from years prior to 2021 as well. Basically, it is never too late to satisfy your tax responsibilities. The only real challenge is to learn the smartest way to approach the task. Someone like yourself might be timid or fearful of filing back taxes due to the uncertainty of what to expect from the process. But for most, filing back taxes reaps a world of benefits.
One of the most beneficial outcomes of filing your back taxes is the possibility of receiving a tax return. By claiming your return from the previous year or years, you could get back a hefty payload in the form of a tax refund.
Avoiding late fees and late filing penalties is a prime reason to file your back taxes. Such fees and penalties can add up to large sums of money, plus they can impede on your credit score and loan eligibility. Not only will you face fines and penalty fees for filing your taxes late, but if you do not pay what you owe to the IRS, you will be fined even more.
If you are planning to apply for a loan, such as a mortgage or business loan, filing and paying your back taxes is something you will want to do before getting started with the process. Most financial institutions require loanees to show proof of income, which cannot be supported with proper documentation if your taxes are not filed and up to date. Having your tax liability in good standing makes the loan and approval process much easier.
If you are a sole proprietor or freelancer, then you are required to pay Social Security taxes through your individual income tax return and estimated tax payments. This means that you benefit from filing your back taxes because it will keep you eligible for Social Security retirement and disability benefits.
A person can file as far back as 6 years, but ultimately, the IRS wants you to file your back taxes no matter how far they go back. However, after three years, you cannot claim refunds or certain tax credits, which means you will likely pay more. If you are filing back taxes from the past three years, you could still be eligible to claim certain tax credits and a refund.
To file your back taxes, you will need to gather all of your necessary and relevant tax documents from that particular year. These documents include your W2, 1099, 1098, and/or any other documents that prove income and expenses. Next, contact the IRS and request the necessary tax forms you will need to file back taxes. If you cannot gather all the documents you need, fill out a Form 4506-T to get your tax transcript from the IRS.
Last, simply file your return as you normally would. Just be sure you are using the right year tax return form. If you are filing back taxes for 2017, you will need to use a 2017 tax return. You can download any tax form you need directly from the IRS website.
Are you looking for an Indiana-based CPA who can help you understand your back taxes and tax requirements? Contact Aspire CPA at (317) 469-4500, or email our office at email@example.com, and speak with a licensed Certified Public Accountant to learn how our accounting and tax services in Indianapolis, Indiana can help you take your success to the next level.
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