The Three Things You Need To Know About Tax Preparation

1. There are FREE options
2. You sign your tax return under penalty of perjury.
3. An extension of time to file is NOT an extension of time to pay.

First, there are FREE options. For 2020, taxpayers whose prior-year adjusted gross income was $69,000 or less, and that’s most people, can use IRS Free File. Generally, taxpayers must complete their federal tax return before they can begin their state taxes.
Over $69,000 – can still file free (fee for state tax preparation)

• Must know how to do your taxes yourself
• Does math; offers only basic guidance
• You must have your 2018 tax return

Free file companies include:
TurboTax
H&R Block
TaxSlayer
Several others
Each have different rules –
Use the Lookup Tool to help you choose a Free File offer to file your taxes for free online. Just answer a few simple questions about income, age, and state residence to find out which offer(s) is available for you.
tinyurl.com/freefile2020
There Are FREE options

Second, You should be aware that you are liable for all the information on your tax return under penalty of perjury – even though you didn’t prepare the return yourself.
You should be aware that you are liable for all the information on your tax return under penalty of perjury – even though you didn’t prepare the return yourself.

So. I have had many clients who got into trouble because of unscrupulous tax preparers. The scheme goes like this: A friend or co-worker tells you that their tax preparer got them a HUGE refund and recommends you use that tax preparer. They generally charge a little more – but that is more than offset by the huge refund you get. So, you tell your friends, family and coworkers about this GREAT tax preparer. And then they sign up with that preparer.

They get you that refund by falsely claiming that you run a business. And then make lots of business deductions. Deductions you really aren’t entitled to.
Most people don’t really review their tax return, they simply sign it and count the money!
Sometime later – sometimes years later – the IRS notices that all this tax preparers returns include big refunds. This is a red flag. So, the IRS audits all the tax returns the tax preparer has prepared over at least the last 3 years.
When you get audited, along with all your friends, family and co-workers – the IRS will demand the refunds back and may come after you for fraud and filing a false return.
Just because a tax preparer files your tax return, doesn’t mean you aren’t responsible for the information that is in it.
So, ALWAYS review your return. If you don’t understand something. ASK about it.

You sign your tax return under penalty of perjury.

Finally, An extension of time to file is NOT an extension of time to pay.Often, when taxpayers don’t have the money to pay their taxes on the April 15th deadline, they simply file an extension (IRS Form 4868 “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.”) What they don’t understand is, the extension does NOT extend the time to pay the taxes due.

Often, I hear the objection, “I don’t know what I owe until I complete my return!” The answer is – estimate the tax due. If you overpay, you will get a refund. If you underpay, you will have to pay PLUS failure to pay penalties and interest. The penalties are based on how much you owe. So if you make an estimated payment, you will reduce the penalty
If you can’t pay, you should still file your tax return on time, or with a timely filed extension.

An extension of time to file is NOT an extension of time to pay.

Chicago Attorney Steven A. Leahy is the Author of "Deal With Your IRS Problem Today!," host of the popular radio show "The IRS Radio Hour" heard every Sunday evening at 5:00 on AM 560 The Answer, and the principal at Opem Tax Advocates. He helps Business Professionals with Tax Resolution, Tax Planning, & Tax Compliance. Visit ChicagoTaxTeam.com or call (312) 664-6649.