Page 26 - Escape Your IRS Nightmare Flip Book
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First, generally the only information you need is the information from the last year. So go get your
bank statements with check images and credit card statements for all twelve months of the last year.
Most banks and credit card companies allow you to access these statements online and print them for
free.
Next, determine all of your sources of income. Make a list if necessary and see who might have sent
you a 1099 form, K1 form, or W2 form in the mail.
After you have reviewed your income, compare it to the deposits reflected on your bank statements to
make sure they match. If they don’t match, look at your deposits to see what you might have missed.
It is important you do this step, otherwise the IRS may come back later and hit you with
“Underreporting Penalties” and “Failure to Pay Penalties”. This can be thousands of dollars or more
depending on the amount of income missed!
Lastly, we need to look at what your expenses were. Common expenses are items purchased for
producing income or expenses associated with doing business. Deductions can include mortgage
interest deductions, student loan interest deductions, charitable donations, moving expenses, child care
expenses, expenses related to required licenses, etc.
Make sure you go over your bank statements and credit card statements with a fine tooth comb and
write down every qualifying expense you can find. This will help reduce the total income you received.
If you paid for items in cash you will likely need receipts from those transactions to substantiate what
was purchased and for how much.
That’s it. Now you can piece together all the income you earned and the expenses you paid that you
can subtract from the income you received.
Your deductions and credits will be reported separately on the return, but will also help to reduce the
total taxes you owe!
And that’s it!
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Your tax return is due on April 15 every year. You must pay the tax return in full by the deadline or
you will be hit with “Failure to Pay” penalties.
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