Although taxpayers have until April 18, 2023, to file a 2022 calendar year return, the Internal Revenue Service started processing returns in January. 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 are owed a refund, the sooner you file, the sooner you'll have extra cash. Regardless of the timing you choose, reducing the stress of filing taxes is always welcome. Read below for tax filing preparation tips to help avoid feeling overwhelmed.
Preparing for tax filing requires earners to get all their ducks in a row. Employers are required to provide a W-2 by January 31. Those who made more than $600 can also expect a 1099 form to be sent out by the same date. The more prepared and organized you are, the earlier you can file. Below are 6 helpful tips that can minimize the stress of preparing to file taxes.
Most information needed to file a tax return 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 creating a digital folder on a home computer or device is usually more convenient, it may be wise to print sensitive personal identity information and maintain a hard copy in a paper folder. Hackers troll the internet looking for precisely this type of data. You can use this same folder to store any paper statements received until you have time to scan them.
Whether in an online or a manilla folder, organizing your documents by category will save a lot of time; if you pay someone to prepare your taxes, this extra step could also save you money. Following is a list of the most common tax documents broken down by category. Consult with a tax advisor to see if they or others apply to you.
Income Adjustments - Consult your tax advisor to see if any of the following adjustments can lower the amount of taxes you owe or increase your refund.
Deductions and Credits - The following deduction and credits could also reduce the amount of taxes owed, resulting in more money in your pocket. Be sure you have the documentation to back it up.
Filing taxes can be challenging. The IRS forms found at local post offices, libraries, and other locations have step-by-step instructions. Online platforms also 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 that a wide variety of resources are available if needed.
If you decide to use a tax preparer, schedule your appointment early. You want to ensure the preparer has time to review your documents and request additional information from you. They'll need time to prepare and file to avoid having to request an extension.
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; the same holds true for 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.
Low to moderate-income workers and families (with and without children) can get a tax break if they qualify for the Earned Income Tax Credit (EITC.) Qualifying families with three or more children could earn the maximum EITC amount of $6,935. Other deductions are available to help working families keep a little more of their hard-earned salaries. Before completing your tax filing, thoroughly investigate applicable deductions and credits. You can start with the deductions and credits listed in Tip #1 above, as well as consult with your tax preparer, or visit IRS.gov for more details.
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 substantially impact your heirs' future tax liability.
Significant 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.
If you prepare your own taxes, researching changes to tax laws could save you a lot of money. To take advantage of tax breaks and minimize how much you pay in taxes, make sure you understand what's new and where to enter the information on the forms. If you hire a tax preparer, this knowledge will also give you the background to understand how they completed your return.
At Middlesex Federal, we understand that filing taxes may not be on anyone's list of enjoyable activities. It takes time and effort to organize documents, find a tax preparer or prepare taxes yourself, and review and understand new tax rules and regulations. Middlesex Federal has one more time-saving tip: enroll in eDocuments to obtain statements and tax documents early. It's fast, easy, secure, and allows you to download and save or print.
We hope these tips will help make filing taxes this year and years to come stress-free.
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