The tax season is fast approaching, and for every working individual, this is the time to get all your financial affairs in check. Whether you are doing the taxes yourself or seeing a tax adviser, here is a guide to all the documents you need to file your tax returns. For those in employment, several documents will come in handy for accurate tax preparation.
What do I need for tax preparation?
Your tax preparer will ask to be furnished with a couple of details and documents for the tax preparation process. Some of the things you should be prepared with include:
Social Security details
This is one of the first things your tax preparer will ask for. The Social Security Number (SSN) is a crucial piece of information you need to provide along with other details such as name, address and filing status. It includes a unique nine-digit number and an expiration date. You can apply for the SSN online at the SSA website or through an employer if they offer this service as part of their benefits package.
Photo identification cards
Depending on the type of tax preparation you are doing, your preparer may ask for a photo ID such as a driver’s license or passport. This is because some forms like W-BEN (Wage and Tax statement) require specific details about dependents to calculate your taxable income correctly.
Your preparer will ask you to provide them with a list of all the tax documents that various government agencies have issued. These include Form W-BEN, TDS Certificates and EPF statements from past employers for filing tax returns or submitting additional information required in case there is a mismatch.
Depending upon your specific case, you may be asked to provide additional information in the form of proof for deductions or tax credits claimed on returns, such as medical bills and tuition fees paid during the year. However, before filing returns, it is recommended that you verify all these details with a professional.
These may include tax forms reporting other types of income, such as Schedule K-l for trusts, partnerships and S corporations. In addition to these documents, you may also need your bank account number, routing number along with a copy of last year’s return if you are filing one in the current financial year. Note: If you are filing your tax returns online, some of these documents may be required only if the computer system prompts you.
If you are claiming deductions for expenses such as medical bills, tuition fees or interest on a home loan, your preparer will also ask for receipts to check if the expense claimed is accurate. Note that this list of documents is not exhaustive and may differ from case to case depending upon personal circumstances, so it’s best to get in touch with a professional
What documents do I need from my employer?
If you’re employed, your employer may provide you with a statement of earnings and tax deductions at the end of each year or quarter, including:
The TDS certificate shows your tax deducted on salary payments made to you during that financial year. A W-BEN is a “statement” from your employer showing details such as income earned, any benefits provided, along with taxes paid by the employer.
This form is issued by your employer and contains the tax deductions made from your salary, such as TDS, PF or any other deduction that may be applicable. Note that if you cannot download Form 16 through the UAN portal of EPFO, ask your HR department for a copy instead.
This shows the amount of PF that has been deposited into your account. If you are employed in more than one place, each employer will provide a W-BEN statement to report income and tax deductions separately for every other job held during the financial year. It is advisable to collect all these forms from employers as they may come in handy when filing income tax returns.
What are the risks of giving the wrong tax information?
The consequences of giving incorrect information may include:
– Penalty and interest charges for under-reporting or misreporting income.
– A higher tax liability than originally filed because the taxpayer did not take all allowable deductions, credits etc., into account.
– Audit requests from the Income Tax Department could delay refund processing time if you end up having to provide additional documentation.
– Fines and criminal prosecution for intentional misreporting of income or falsification of documents submitted with the return.
In addition, there are also other risks associated with giving wrong information, such as:
– Inaccurate computation of tax liability leads to a higher tax outgo at the time of filing returns.
– Forfeiture of refund if the tax return is selected for scrutiny and department officials detect incorrect information given by taxpayer during the verification process. This could lead to levy of penalty, prosecution or even imprisonment in serious cases where tax evasion can be proved beyond doubt.
– Taxpayers may also lose their right to carry forward losses to reduce the current year’s tax liability.
Inaccurate computation of taxes paid during filing returns could lead to over or underpayment of dues, leading to interest being charged by the Income Tax Department for late payments.
Come to LBS Tax!
Are you searching for tax preparation Chandler services? Give us a call at LBS Tax; we have provided accounting solutions to residents for over a decade. Our licensed and experienced CPA team is well equipped with the skill set required to ensure all your questions are answered in detail as we prepare your taxes this year!