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On our blogs you will find our Tax Sherpa Stories series as well as additional posts covering all manner of tax topics. Some items are timely as there are multiple tax filing dates throughout the year and some items are important larger concepts.

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Debunking the Myth: It's Never Too Late Late to File Your Taxes

October 18, 20232 min read

Debunking the Myth: It's Never Too Late to File Your Taxes

Hello, Tax Sherpa community!

Today, I want to address a prevalent misconception in the tax world. Many believe that if they've missed a tax deadline, it's too late to do anything about it. I understand this fear all too well, having once been in that very situation.

My Personal Journey into the Tax World

Back in the mid-2000s, I had gone several years without filing taxes, thinking I didn't need to. It wasn't until I received alarming letters from the IRS that I realized the gravity of my oversight. This experience was my initiation into the tax realm, and it's what led me to where I am today.

The Reality of Missing Deadlines

Yes, there are deadlines in the tax world, like the April 15th deadline for individuals. But what happens if you miss it? Or the October extension? Or even several years?

The answer is not to bury your head in the sand. The IRS primarily seeks compliance. They want taxpayers to adhere to the law, both in terms of payments and filings. If you've missed a year or more, the solution is simple: file those returns.

The Benefits of Being Proactive

By being proactive, you can avoid the stress and anxiety that come with IRS letters and potential penalties. If you're missing records, the IRS provides transcripts that can help you or your tax professional reconstruct past years.

Conclusion

The key takeaway is that it's never too late to address your tax situation. Whether you've missed a single deadline or several years, there are always steps you can take to rectify the situation. If you need assistance, don't hesitate to reach out to us at Tax Sherpa. We're here to guide you every step of the way.

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Neal McSpadden

Neal went from owing the IRS over $1,300,000 to Zero and in so doing discovered the world of tax planning. Since 2011 he's helped tens of thousands of clients save hundreds of millions of dollars on overpaid income taxes.

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Frequently Asked Questions

Q:

What's the difference between tax advisory and just filing my taxes?

Filing your taxes each year is a necessary task, but it is always backwards looking. Tax advisory works with you throughout the year to make sure that you are on the right track when it comes to your taxes and have strategies in place to save money now.

Q:

I've heard about tax write-offs for small businesses. What exactly can I write off, and how does it benefit my business?

Tax write-offs, also known as tax deductions, are expenses that a business incurs that can be subtracted from its revenue to reduce the amount of taxable income. Common write-offs include office supplies, mileage, rent for a business location, and advertising expenses, among many others. By writing off legitimate business expenses, you can significantly reduce your taxable income, which can lead to a lower tax bill. It's essential, however, to maintain proper records and ensure that the expenses are truly business-related.

Q:

What's the difference between a tax deduction and a tax credit?

A tax deduction reduces the amount of your income that is subject to taxation, which in turn can lower your tax liability. Common deductions include expenses like mortgage interest, student loan interest, and business expenses. A tax credit, on the other hand, is a direct reduction of your tax bill. This means if you owe $1,000 in taxes and have a $200 tax credit, your tax due would be reduced to $800. Some popular credits include the Child Tax Credit, the Earned Income Tax Credit, and credits for energy-efficient home improvements.

Q:

I'm thinking of hiring an independent contractor instead of an employee. Are there different tax implications for each?

Yes, there are significant tax differences between hiring an employee and an independent contractor. When you hire an employee, you're responsible for withholding federal and possibly state income taxes, Social Security, and Medicare taxes from their paychecks. You also typically pay unemployment taxes on wages paid to employees. Independent contractors, on the other hand, are responsible for their own taxes. As a business owner, you'd provide them with a Form 1099-NEC (if you pay them $600 or more during the year) instead of a W-2, and they would be responsible for their own self-employment taxes. It's important to correctly classify your workers, as misclassifying can lead to penalties.

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