When I explored a career in taxes, I was promised that I could earn a year’s income by working just three or four months out of the year.
That was a lie.
The truth is, issues come up year-round, especially since the IRS discovered computers. With all the agency’s clever cross-matching programs that now exist, I hear from the IRS all the time.
Because the IRS is working all year, you also need to pay attention to your taxes long after tax season ends.
Here are three reasons you should care about taxes after April 15:
1. The IRS can send you notifications at any time of year. If the IRS sends you a notice about missing information or an audit, it’s your responsibility to respond. If the IRS doesn’t get a response from you, it automatically sends you a series of follow-up notices. If you continue to be unresponsive, the IRS can collect its debt by garnishing your wages, keeping future tax refunds, or filing liens against you.
Had you received the notice and responded, you probably could have made the assessment go away—or you would have at least had a chance to defend yourself in an audit.
The IRS may also send you a refund or a notice about an additional proposed refund. If you don’t make a claim within three years, the IRS closes its books on you and you forfeit the refund.
2. You may have missed some deductions. Now that tax-filing season is over and you’re not stressed out about gathering your paperwork at the last minute, you actually have time to think. Be sure to research tax benefits and deductions that you may have overlooked.
Although this will help you for the coming tax filing season, you may learn of tax credits or deductions you have overlooked in the past. Don’t worry—you can amend your tax return and get a refund for up to three years after you filed it.
3. You may want to change your tax situation. As with investment portfolios, sometimes your tax situation needs some rebalancing. Review your finances to see if there are tax benefits you can take advantage of that you are not currently using. For instance, could you afford to buy a home instead of renting (and then take advantage of mortgage interest deductions)? Should you really continue running your unprofitable business, or is it time to cut it loose and get a job?
Review your withholding to see if it’s time to have more or less money withheld from your paycheck each month. Also review your retirement accounts. Is it time to make some tax-advantaged investments? Should you be moving funds from your IRA or retirement plans? The answers to these questions can help guide you to your next step.
Eva Rosenberg, EA is the publisher of TaxMama.com ®, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.