10 Important Things You Should Never Forget When Doing Your Taxes
By Will Vitka,2023-02-07
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The IRS announced it will begin accepting and processing returns starting Jan. 23, well ahead of the April 18 deadline to either get your paperwork in or request an extension.
And while Americans have to file every year — either by doing it themselves or hiring a pro — a few things are different this time around.
Here are 10 important things to consider when you file your taxes.
Income tax brackets are a little different
You probably know the drill here already. The more you make, the higher your tax rate.
While the rates themselves haven’t changed (10%, 12%, 22%, 24%, 32%, 35%, and 37%), the income thresholds have been tweaked because of inflation. Depending on where you landed on the bracket for your previous filing, it could be different this time.
Here are the new thresholds.
- 37% for incomes over $578,125 ($693,750 for married couples filing jointly);
- 35% for incomes over $231,250 ($462,500 for married couples filing jointly);
- 32% for incomes over $182,100 ($364,200 for married couples filing jointly);
- 24% for incomes over $95,375 ($190,750 for married couples filing jointly);
- 22% for incomes over $44,725 ($89,450 for married couples filing jointly);
- 12% for incomes over $11,000 ($22,000 for married couples filing jointly);
- 10% for incomes of $11,000 or less ($22,000 for married couples filing jointly).
Make a checklist
Considering how much financial information you need to gather, regardless of whether or not you’re handling the paperwork yourself or paying someone to do it, it’s a good idea to make a checklist.
The nonprofit United Way, a partner of the IRS, has a free tax prep checklist online if you need help getting started.
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Get your documents together
Organization is the name of the game when it comes to tax season.
You should have last year’s return on hand if it’s available and any W-2 forms for yourself or a spouse from each employer. Add 1099, 1099-K, 1099-MISC, and 1099-INT forms to that list.
Despite the crypto crash seen in 2022, you’ll need any records of digital asset transactions as well.
The IRS has a list of information you should have ready to go online.
Ask yourself if you need to hire a tax professional
Life can be overwhelming even without the pressure of filing taxes. There’s nothing wrong with simply saying, “I neither want to do this nor know how to do this.”
Plus, expert help might be able to save you money since their knowledge of the tax code is probably greater than yours.
As with getting a head start on organizing your financial documents, it’s better to find a tax expert sooner rather than later.
It's entirely possible that if you wait until March, the experts won’t be taking on new clients, and you won’t find the help you need to get your return done on time.
The AARP Foundation Tax-Aide offers free tax preparation assistance usually through local libraries. Their volunteers are trained and IRS-certified each year.
Pick the right software to do your own taxes
There are many software and digital options if you decide to do your own taxes this year. If your adjusted gross income is $73,000 or less, you can use the IRS’s Free File forms online.
If your AGI is over $73,000, you can still digitally file for free, but there’s no guidance and calculations are limited. You can also look into nonprofit, IRS-partnered The Free File Alliance online.
Pro tip: If you’re looking for more robust tools — like H&R Block, TaxAct, or TurboTax — it’ll cost you. Check out our review of the best tax software.
Filing with a side gig
If you freelanced, are self-employed, or had a way to make money on the side and got paid through a third-party app, you’re going to get a Form 1099-K. Any transactions, even just one, over $600 can mean a 1099-K gets issued.
If it’s new to you, be cautious and make sure you’ve got all your key income paperwork together. Most importantly, if you see something wrong on the 1099-K, reach out to the employer right away; the IRS can’t correct it.
Your refund could be lower
There are a few reasons your refund could be lower this year. The biggest reason, which impacts everyone, is that there were no stimulus payments for 2022.
In addition to that, keep in mind that your charitable contribution deductions have been lowered.
The child tax credit has returned to its pre-pandemic size, the child- and dependent-care tax credit has been reduced, and there was a reduction to the earned income tax credit.
You can still contribute to your retirement account
Taxpayers have until the April 18 filing deadline to contribute to an individual retirement account (IRA). If you make a deductible contribution, that lowers your tax bill. It’s a win-win, but one that’s easy to forget.
On the flip side of that coin, you also have until April 18 to withdraw excess contributions and duck the 6% annual tax on excess amounts.
Do you want a standard or itemized deduction?
The question of the standard deduction versus an itemized deduction comes largely down to numbers and organization.
The standard deduction is the easiest option for most Americans. It’s $12,950 for individuals, and $25,900 for married couples filing jointly.
However, you can save more money with an itemized deduction if your qualified expenses — emphasis on qualified — are larger than the standard deduction.
Last but not least, don’t forget the basics
Is your online IRS account set up? If you don’t have a Social Security number, have you checked your Individual Tax Identification Number? Did you withhold enough tax or do you need to make an adjustment?
Have you set up a direct deposit for your refund? There are a lot of basic, little things you can take care of before you start preparing your return.
And it doesn’t matter if you’re a whiz when it comes to arithmetic or you reach for a calculator every time you see numbers, check your math when you’re preparing your taxes.
In carpentry, the adage is measure twice, cut once. The same goes for filing your return. Check twice, file once.
And finally, make sure your documents are signed before they’re submitted. You don’t want your return getting held up due to a simple mistake.
Preparation, and being mindful of what needs to get done, is critical to surviving tax season. The more you get done before the IRS’s deadline, the easier your life will be.
Remember, the deadline to file is April 18, but there’s no reason to wait until the last minute. Getting all your ducks in a row beforehand will make the whole process easier.
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