Important Things to Know Before Filing Income Tax Return Online: As tax season approaches, it’s crucial to stay well-informed about the process of filing income tax returns, especially when it comes to the online filing method. In today’s digital era, filing taxes online has become increasingly popular due to its convenience and efficiency. However, before diving into the online realm of tax filing, it’s essential to understand certain key aspects to ensure a smooth and error-free experience.
In this blog post, we will explore the important things you need to know before filing your income tax return online. Whether you’re a seasoned taxpayer or a first-time filer, these insights will help you navigate through the online tax filing process with confidence and avoid common pitfalls.
1. Pan and Aadhaar Card: Linking PAN and Aadhaar are mandatory and helps in verifying your ITR online via an OTP.
2. Bank Account Details: It is mandatory to provide details of all active bank accounts in the ITR. You are required to provide details such as your bank name, IFSC, account number, account type, and the number of accounts that you hold.
3. Bank Statement/ Passbook: To know interest earned on savings accounts, interest income on fixed deposits, etc. during a financial year. Bank account statements are required at the time of ITR filing.
4. Form 16: Form 16 part B or Salary Certificate is issued to you by your employer and has details such as salary paid, taxes deducted, and deposited during the financial Year.
5. Month-Wise Salary Slips: If you are a salaried Individual then month-wise salary slips are also essential so that proper deduction can be claimed.
6. Form 26AS: It is an annual tax statement like a tax passbook that has details of the taxes deposited and deducted from the government against your PAN.
7. Investment Proofs: Tax savings investment and expenditure proofs such as receipt of the life insurance premium paid, Public Provident Fund passbook, receipt of medical insurance, fixed deposit receipt, donation paid receipt, home loan repayment certificate/receipt, tuition fee paid receipt, mutual fund consolidated account statement, education loan repayment certificate, etc. are essential Documents to claim a deduction when filing ITR. (These deductions can be claimed only if you opt for the old tax regime when filing ITR)
8. Capital gains from the sale of property, Mutual Funds, or Shares: The sale of property, shares, or Securities will result in capital gains or losses. For this, you need to have documents like Capital Gain Statement, P&L Statement, Holding Statement, Property sale deeds, etc.
9. Details of investment in Unlisted Shares: In case you were holding unlisted shares during the financial year, you need to disclose the same in your ITR. In this case, at the time of filing your tax return use ITR-2 instead of ITR-1.
Common Mistakes to Avoid in Online Tax Filing
While online tax filing offers convenience and efficiency, it’s important to be aware of common mistakes that can occur during the process. By understanding and avoiding these pitfalls, you can ensure the accuracy of your tax return and prevent potential issues with the tax authorities. One common mistake is entering incorrect personal information, such as Social Security numbers or names, which can lead to processing delays or errors in tax calculations. Another frequent error is failing to report all sources of income, including freelance work or investment gains. This can trigger audits or penalties from the tax authorities. Additionally, overlooking eligible deductions and credits or miscalculating them can result in missed opportunities to save on your tax liability. It’s crucial to review the IRS guidelines and consult relevant tax resources to ensure you’re claiming all the deductions and credits you’re entitled to. Lastly, overlooking the importance of proofreading and double-checking your tax return before submission can lead to typographical errors, omissions, or incomplete information. Taking the time to review your return thoroughly can help catch and rectify any mistakes before they become problematic. By being mindful of these common errors and practicing due diligence, you can navigate the online tax filing process smoothly and ensure accurate reporting of your income and deductions.
Required Documents for Online Tax Filing
When preparing to file your income tax return online, it’s essential to gather all the necessary documents beforehand. Having these documents ready will ensure a smooth and accurate filing process. Here are the key documents you should have on hand:
Personal Information: Collect personal details such as your Social Security number, date of birth, and the same information for your spouse and dependents, if applicable.
W-2 Forms: These forms provide information about your wages, salary, and tax withholdings from your employer(s). Ensure you have all the W-2 forms from each employer you worked for during the tax year.
1099 Forms: If you received income from sources other than employment, such as freelance work or self-employment, you will likely receive 1099 forms. These forms report various types of income, including interest, dividends, and freelance earnings.
Form 1098: If you have a mortgage, you will receive Form 1098 from your lender. This form provides details about mortgage interest paid during the year, which can be deductible.
Records of Deductions: Gather documentation supporting your itemized deductions, such as receipts for medical expenses, property taxes, charitable donations, and business expenses if you’re self-employed.
Investment Statements: Collect statements from your financial institutions, including brokerage accounts and retirement plans. These statements will provide information on capital gains, dividends, and contributions made during the tax year.
Health Insurance Information: Ensure you have Form 1095-A, 1095-B, or 1095-C, which report your health insurance coverage for the year. This information is necessary for compliance with the Affordable Care Act requirements.
Prior Year’s Tax Return: Having a copy of your previous year’s tax return can help ensure accuracy and facilitate the completion of certain sections on the current year’s return.
Bank Account Details: If you’re expecting a tax refund, provide accurate bank account details for direct deposit.
By organizing and gathering these required documents, you’ll be well-prepared to complete your online tax filing accurately and efficiently. Remember to keep copies of all documents for your records and retain them for the recommended period of time in case of any future inquiries or audits.