Although taxpayers have until April 18 to file, the Internal Revenue Service plans to start processing returns as early as January 23, 2023. The conventional wisdom surrounding filing taxes breaks two ways. If you owe the state and federal government money, there’s no harm in waiting to write that check. But if you're owed a refund, the sooner you make a tax filing, the sooner you’ll have extra cash. Regardless of the timing you choose, reducing the stress of filing taxes is always welcome. These are ways you can negotiate a tax filing without feeling overwhelmed.
6 Tips to Prepare for Filing Taxes
Preparing a tax filing tasks earners with getting all of their ducks in a row. Employers are not necessarily required to provide a W-2 until Jan. 31. Those who made more than $600 can also expect a 1099 sent out by the same date. Those who were paid on e-commerce platforms such as PayPal and Venmo might not receive documentation. That’s largely because the IRS tapped the brakes on millions of 1099-K forms until next year. But that doesn’t prevent you from preparing to file taxes as soon as possible. These are 6 tips that can minimize the stress of filing taxes.
1: Organize Tax Paperwork
The vast majority of the information needed to file a tax is about yourself and your family members. Consider starting a folder that includes the names, birth dates, and Social Security numbers of those included in this year’s tax filing.
Although it’s usually convenient to create a digital folder on a home computer or device, it may be wise to print this sensitive personal identity information and maintain a hard copy. Hackers troll the internet looking for precisely this type of data. That being said, it’s essential to also pull together revenue from IRAs, stocks, rentals, and other types of income.
2: Decide Who Will Prepare and File Your Taxes
Filing taxes has never been easier. The IRS forms found at local post offices, libraries, and other locations have step-by-step instructions. There are also platforms on the internet that streamline the process and expedite your tax filing electronically.
If your taxes are complicated or you’ve undergone significant life changes that impact your finances, it may be worthwhile to contact a local CPA. There are usually chain outfits with extended hours during the tax season and organizations such as AARP offer free or low-cost services for eligible seniors. The essential point is there are a wide variety of resources available if needed.
3: Understand Qualified Deductions and Credits
In terms of lowering your tax liability, there’s some good news from the IRS. The standard deduction for married people filing jointly increased by $800 from the previous year to $25,900. Single people filing taxes can anticipate a bump of $400 to $12,950, and the same holds true of married individuals filing separately.
For heads of households, the standard deduction went up $600 to $19,400 for the tax year 2022, according to the IRS. Families with three or more children will enjoy a greater maximum Earned Income Tax Credit amount of $6,935. There are also a wide range of deductions that will help working families keep a little more of their hard-earned salaries. Before completing your tax filing, thoroughly investigate all of the applicable deductions and credits.
4: Make Sure Beneficiary Designations are Up to Date
The primary reason people change beneficiary designations stems from major life changes. Getting married, divorced, losing a loved one, or the birth of a child may not necessarily alter your tax filing situation this year. However, updating these designations can have a substantial impact on the tax liability your heirs will incur later.
5: Research Latest Tax Laws
Major changes have been made to the tax code in recent years. The Tax Cuts and Jobs Act of 2017 capped mortgage interest, business expenses, and other deductions. By that same token, the measure raised standard deductions and child tax credits.
The recently passed Inflation Reduction adds incentives for people who invest in energy efficiency. For example, home improvements that reduce utility bills and lower a property’s carbon footprint may be eligible for rebates. You may save a good amount of money by researching changes to tax laws.
6: Don’t Procrastinate When Filing taxes
It’s important to make an informed decision about when you plan to make a tax filing and follow through. That may involve saving up money to pay off the IRS before April 18 or filing taxes as soon as they can be prepared to get your refund. Missing IRS deadlines can result in unnecessary penalties and the government getting more of your hard-earned money than it’s entitled.
Get a Head Start on Tax Season Today!
At Allegiance, we understand that filing taxes is not high on anyone’s list of enjoyable activities. It takes time and effort to get documents ready, find a tax professional, and understand any new rules and regulations. By using our tips, we hope to help relieve some of the stress so you can plan ahead and have a stress-free experience filing taxes this year.
Allegiance Credit Union does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisors before engaging in any transaction.