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Word of the Week 'Tax Season'

February 6, 2019

 DEFINITION of Tax Season

Tax season is the time period between January 1 and April 15 of each year when individual taxpayers traditionally prepare financial statements and reports for the previous year. In the United States, individuals must file their annual tax return by April 15 of the year following the reportable earnings.

 

How To Calculate The Tax You Owe
BREAKING DOWN Tax Season

During tax season, businesses must furnish employees, contract laborers and others, such as royalty earners, with tax documents specifying data required to complete an individual’s tax returns. People who are required to file a tax return must do so by April 15 or request an extension.

 

Tax season is a busy period for many tax preparers and accounting professionals. The three and a half month period at the beginning of the year is the time when the necessary paperwork, including wage and earnings statements (such as 1099s or W-2s) is collected to assemble tax returns. While some individuals calculate their own tax returns, many rely on the expertise of tax preparers and accounting professionals to be certain the paperwork is filed correctly and to improve the financial outcome of the tax return. An individual that makes less than $66,000 a year can file his or taxes for free on the IRS website. Individuals must file federal, state and, in some cases, local tax returns.

The tax season is the period within which all taxes must be filed up until the deadline. The deadline each year is set on April 15. However, if this date falls on a weekend or holiday, it is moved to the next business day. For instance, April 15, 2018 fell on a Sunday, and Monday April 16 was a holiday – Emancipation Day. Therefore, taxpayers had until Tuesday April 17, 2018 to file their 2017 tax returns and to pay any taxes due. Tax returns submitted after this date are subject to late penalty fees.

 

According to the Internal Revenue Service (IRS), a taxpayer with gross income(all income from all sources) of more than $10,000 will have to pay federal tax. For independent contractors, or what the IRS refers to as “non-employee compensation,” taxes on any earnings over $600 must be paid. Employers must provide employees with a W-2 at some point in January. Businesses that hire independent contractors will have to give them their 1099-MISC by a certain date, which will include information regarding non-employee income.

 

The IRS advises that all taxpayers keep copies of their prior-year tax returns for at least three years. In the event of an IRS audit, a taxpayer will be required to present the last three years of his or her documents. In extreme cases, such as suspicion of fraud, s/he will be expected to show seven years of documents.

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