7 Tips For Preparing To File Your Taxes

The 2023 tax season has passed, and the IRS expected that more than 168 million filers will file their 2022 tax returns by the April 18 deadline.

1. Sort Through Your Tax Records and Financial Records

Spend some time organizing your tax documentation and financial information to make the filing process quicker and simpler.

As a starting point, use last year’s tax return. Finding your prior tax return ensures you have the necessary paperwork to prepare your tax return this year.

You may get a copy of your previous year’s tax return by visiting the tax software provider you used last year or requesting a copy via the IRS web portal. If you dealt with a CPA or another tax expert, you were provided a copy of your return when you filed.

Though each person’s tax situation is unique, here is a list of typical tax forms and papers you should gather before submitting your tax return.

Investors

• Dividend Income (1099-DIV) Interest Income (1099-INT)
• Property Sale (1099-S)
• Income from a partnership or an S-corporation (Schedule K-1)
• Income from Rentals (1099-MISC)

Employees

• Wage and Tax Declaration (W-2)

Independent contractors and freelancers

• Non-Employee Compensation Income (1099- NEC)
• Transactions using Payment Cards and Third-Party Networks (1099-K)

Unemployed people

• Payments from the Government (1099-G)

Students and recent grads

• Statement of Tuition (1098-T)
• Statement of Student Loan Interest (1098-E)

Homeowners

• Statement of Mortgage Interest
• Property taxes

Donors to charities

• Receipts for charitable contributions

Retirees

• Statement of Social Security Benefits (SSA-1099)
• Pension, Annuity, and Retirement Distributions (1099-R)

2. If You Changed Your Name or Relocated During the Year, You Must Notify the IRS

You must immediately tell the Social Security Administration if you have changed your name. Please do so to ensure the processing of your tax return is on time. Following that, you must apply for a new Social Security card by filling out Form SS-5, “Application for a Social Security Card.” Your changed name will be reflected on the new card.

If you have moved, there are various methods to inform the IRS of your new address.

3. Register for an IRS Online Tax Account

Setting up your online tax account with the IRS is a terrific method to get your tax records without calling or mailing the agency. Logging into an account lets you check payment balances, set up payment plans, and access prior-year tax returns and submitted tax forms.

You may modify your communication choices using the web portal. For example, you may select to have IRS notifications sent to you. It also enables you to delegate authority to a tax specialist.

Please note that the site cannot be used to submit your tax return online.

4. Tax Refunds Will Be Less

The IRS advises Americans that their tax refunds may be reduced this year.

One major cause is the loss of increased child tax credit payments and the cessation of other epidemic assistance, like stimulus funds.

As part of the US President American Rescue Plan, the child credit will be enhanced from $2,000 to $3,600 per qualified dependant in 2021. However, the maximum child tax credit has been reduced to $2,000 for 2022, with returns due this spring.

As a result, the expanded child tax credit is no longer available, and taxpayers may no longer use the recovery rebate credit to seek missed stimulus funds. These changes and other tax law changes may result in reduced tax refunds.

However, taxpayers who have yet to claim expired credits for earlier tax years should do so as soon as possible. The IRS allows you just three years to request tax refunds for previous years.

5. Decide Whether to Hire a CPA or Do it Yourself

The question of whether to employ a certified public accountant or do your taxes yourself is an essential one during tax season. Sometimes, we encourage utilizing online tax software to file your taxes. However, there are certain tax circumstances in which it is better to work with a tax specialist.

If you are a freelancer, run a small company, or are an investment, consider hiring a CPA. A CPA can assist you in navigating potential tax deductions, developing future tax plans, and dealing with the IRS if it ever comes knocking on your door to audit your taxes.

On the other hand, if your tax filing is straightforward, with a basic salary and income statement (W-2) and a few deductions, you should try doing it yourself. This is also a lot less expensive choice.

Keep in mind that if you anticipate needing the assistance of a CPA or other tax professional, now is the time to develop that connection. As Tax Day approaches, CPAs often cease accepting new customers for the season.

6. Find Ways to File for Free

You may be eligible for the IRS Free File Program, depending on your income and the complexity of your tax filing situation.

Taxpayers with an adjusted gross income of less than $73,000 (total income less certain deductions) may be eligible for the IRS Free File Program, a collaboration between the tax agency and online tax software vendors.

Although the program has existed since 2001, you may not be aware of it. Because internet tax software firms provide their services for free, they seldom publicize them. And, even though the IRS believes that 70% of all taxpayers are eligible for Free File, just a tiny fraction of people have utilized it.

You may be eligible for the IRS Volunteer Income Tax Help Program (VITA), which offers qualifying taxpayers free tax preparation help.

The program is available to taxpayers who earn $60,000 or less, have a handicap, or speak little English. Some VITA locations were closed during Covid-19. Visit the IRS website for additional information on finding an open VITA office near you.

7. Request an Extension

You might submit an extension if you didn’t fulfill April 18, 2023, tax filing deadline. Form 4868, “Extension to File,” may be sent to the IRS on or before the due date to seek an extension. A legitimate tax extension moves the due date of your tax return to October 16, 2023.

There are other ways to seek an extension, including utilizing the IRS Free File program or submitting Form 4868 to the IRS. However, although an extension offers you six more months to file your tax return, it does not extend the period you have to pay your taxes. You must still pay by the due date.