As we begin the new year, we are full of excitement and anticipation looking at the year ahead of us. The new year is a time to set new goals for both ourselves and our businesses. The beginning of the year is full of possibilities and opportunities for personal and professional growth. Let’s channel our focus and motivation into preparing for the 2023 income taxes season. Having a tax preparation plan is fundamental to filing your income taxes on time. More importantly, understanding the new tax laws is critical to getting the best outcome possible. Most taxpayers may be thrilled not to owe anything to the IRS. While some individuals are hoping for a decent size refund.
E-file your 2023 Income Tax Returns
Either way, consider electronically filing your 2023 income tax returns. Otherwise, there is a great possibility that your paper returns will be lost in a sea of lookalike documents. Effective this year 2023, individuals should pay special attention to the guidelines changes regarding tax credits. In addition, for those of you who receive income for goods and services through a third-party payment network such as Amazon, PayPal, Square, Venmo, or Cash App, you need to be aware of the new reporting requirement introduced this year.
Filing Your 2023 Income Tax Returns Can Be a Breeze
Get a head start on your 2023 tax preparation. Follow these 7 easy steps to ensure the success of filing your 2023 returns with no hiccups.
Early Tax Preparation Ensures 2023 Tax Returns Filed Ahead of Schedule
Early tax preparation is the key to your success in filing income tax returns on time before the 2023 tax season deadline. To assist in speeding up the process of your tax returns being accepted by the IRS, take responsibility and do your part. Send the required documentation along with your tax returns and set up direct deposit with the IRS. These are time-saving measures for both you and the IRS. If you find that your 2023 tax returns are more complicated than you imagined, prepping early will allow you the additional time that you may need to search for missing documentation and seek professional tax assistance.
Accuracy is Everything
Whether it was intentional or not, any inaccurate information in your 2023 tax returns can be a red flag; sending an alert to the IRS that something is incorrect. It may even potentially trigger an IRS audit. Mistakes happen but individuals need to realize that the IRS’ responsibility is to verify the information you provide with your income tax returns. They must match the information provided by your employer, banks, financial companies; including the payment data from the government itself. If your tax returns somehow contain discrepancies and different information than what the IRS has received on their end, it raises questions. These suspicions can lead to an IRS audit. An IRS audit can be a nightmare. Before you submit your 2023 income tax returns, thoroughly review the accuracy of your returns and required documentation against the information that the IRS has on record. An additional step to ensure the accuracy of your returns is to request a free digital copy of your tax transcript by visiting the IRS website.
Take Advantage of Extensions
There is no harm in filing an extension if you cannot meet the 2023 tax season deadline of April 18. Filing an extension will automatically push your deadline to October 16. However, you may want to consider paying the IRS the taxes you owe. If you are concerned about avoiding penalties and interest, you should make an estimated tax payment to show good faith toward the IRS
It’s Your Responsibility to Research and Understands New Rules for Credits and Deductions
As a taxpayer, you should be informed of the significance of how tax credits and deductions can impact the amount you owe substantially or dramatically increase your refund if you are expecting one.
You may be aware that the American Rescue Plan Act temporarily increased certain tax credits and implemented a special rule for charity deductions. Unfortunately, these programs will be ending, you should review the eligibility rules and deduction amounts to determine what is available that will affect your personal situation.
Pay attention to these existing credits and deductions:
- Child tax credit: It was good while it lasted. However, in 2022, the Child Tax Credit will drop back down to its previous amount of $2,000 per eligible child.
- Child and dependent care credit: The child and dependent care credit in 2022, has a maximum amount of $2,100.
- Earned income tax credit: Unfortunately, earned income tax credits have decreased from the previous year. It’s advised for individuals to touch bases with the IRS on details regarding the new income eligibility and credits for 2022.
- Premium tax credit: If you happened to purchase health insurance through the health insurance marketplace in 2022, that’s good news for you. The American Rescue Plan Act, for the time being, has expanded eligibility for this credit. Therefore, taxpayers with household incomes above 400% of the federal poverty line are included.
- Clean energy vehicle credit: If you purchased a qualifying electric and plug-in hybrid vehicle, you are still eligible for a tax credit of up to $7,500. However, eligibility rules were revised with the passage of the Inflation Reduction Act in 2022. You may want to check to see if indeed your vehicle purchase qualifies before claiming the credit.
- Donations to charity: If you intend to claim a deduction for charitable giving, you are expected to itemize your deductions.
Update Changes to 1099-K
While there has been quite a bit of news regarding the new reporting requirement for income for goods and services received through a third-party payment network such as Amazon, PayPal, Square, Venmo or Cash App. Implementation of this new rule will not be effective until 2023. If this affected you, you do not need to be concerned about reporting your income received through a 1099-K form for the 2022 tax year.
Your Gig Work Counts as Income
Many individuals’ employment options were limited and had no other choice but to work in various gigs. However, if you earned money in a gig economy, such as driving for a ride service, you must report your income and pay taxes on it. Based on how you were classified whether as an employee or a contractor, you may be required to file a Schedule C form. If you have any questions, you may visit the IRS’s Gig Economy Tax Center.
Gains and Losses from Investment Sale
The general rule of thumb is that you usually only have to pay taxes on the sale of investments when you receive a gain. However, many taxpayers seem to overlook the fact that by selling stocks, mutual funds, real estate, cryptocurrency or another investment for a profit, they must report the gain (or loss) on their 2023 tax returns and pay applicable capital gains taxes. If an individual does suffer a loss, he or she may have the option to offset other realized gains or take a deduction depending on his or her situation.
Seek Professional Tax Assistance
Don’t be embarrassed to seek help if you need it. If you have no idea how to report self-income employment or perhaps you need guidance on your online business sales, reach out to a professional tax company. Start Fresh Tax Relief can help you file your 2023 Income Tax Returns. We understand that tax preparation can be overwhelming and time-consuming. We have assisted many individuals like you file their tax returns. There’s no need to feel frustrated and stressed when our professional staff of qualified tax experts can help you file your 2023 tax returns on time.