For the longest time, finance has been the bedrock of society. Revolution dictated that individuals and organizations must give a certain percentage to the government. This levy called tax is no doubt a necessity for earning bodies. Having lain emphasis on tax, people often dismiss a major part of taxation called, “tax return.” A Tax return is a form that contains an annual declaration of a taxpayer’s income, expenses, tax liability among other information. Many people see filing tax returns as unnecessary which is why it is often avoided. Contrary to popular belief, filing tax returns is very crucial to taxpayers. Here are the reasons why:
An easy claim of tax refunds
A tax refund or tax rebate occurs when you pay more than your actual tax liability. Eligibility to get a refund depends on whether the total amount of taxes paid is greater than what is actually owed. A tax refund can only be claimed when a person files a tax return for that year. So if excess of the tax deducted at source (TDS) is withheld, a tax return must be filed to retrieve your refund.
Filing tax returns is important for loans
Tax returns serve as valid proof of income. Hence, financial institutions request for it when a loan is to be given out. When applying for a loan, the records of tax returns are checked to ascertain a person’s trustworthiness. A good record of ITR indicates a steady income and that taxes are paid regularly. That being said, a person who regularly files their tax returns has a higher chance of getting a loan than a person who doesn’t.
Tax deductions can be easily claimed
A tax deduction is an amount subtracted from an income to lower a person’s tax liability due to expenses incurred during the year. Tax deductions protect the taxpayer from unfair levies. It is mandatory to file income tax returns for the fiscal year to be granted tax deductions. It should also be noted that filing ITR is also not exempted to people that do not have any tax liability. For things like this, it is important to file your tax returns as accurately as possible. Sometimes a couple of flaws may arise here and there. To avoid that, I use professional tax resolution agencies to get the job done for me.
Requirement for application of VISA
Some countries deem it essential to have tax returns before traveling abroad. It is advised that income tax return for the most recent year is provided during submission. Because ITR serves as a solid proof of income, it is requested to ensure the credibility and responsibility of an individual. When applying for the VISA of a relative, you will need to submit a financial support affidavit. This will lead to the provision of a transcript from the IRS. An alternative to this is providing individual tax returns. The ability to financially support your relative is then measured by your ITR.
Ownership of foreign assets
Filing income tax returns is mandatory if you possess foreign assets in the United States and other countries. The form needed to be filled when reporting foreign financial assets is called “Form 8938” It is not uncommon for individuals to acquire different assets from foreign countries. The law also mandates taxpayers to report the possession of foreign immovable properties. Failure to do so may attract serious penalties.
A takeaway note is to never underestimate the importance of filing tax returns. It does not only reap benefits but also keeps you on the right track of the law. Whether it is you want to get a loan, a VISA or even acquire an asset from a whole different continent, keep in mind to always take care of your tax returns.