As the calendar turns to a new year and the spring approaches, there is one thing on everyone’s mind – taxes. Tax season is around the corner, and though it can feel heavy, Legacy wants to give you a few tips and tricks to prepare your taxes now, so April is not as stressful.
- Gather Important Documents
When preparing your taxes it is important to gather important documents before filing. This keeps you from having to rummage through filing cabinets. Though everyone may not need the same documents, here are a few to keep nearby:
- Personal Information Documents. Social Security and/or tax ID numbers for yourself, spouse, and all dependents (children or elderly parents) are necessities. Another good item to have would be last year’s tax return, they’re good refreshers of what you filed last year and documents you used.
- Income Documents. You’ll need your W-2 forms and your 1099 forms. Both forms confirm the money you received during the previous year.
- W-2 forms: Employers must issue or mail your W-2 by Jan. 31.
- 1099 forms: 1099s are informational records that detail additional income you received throughout the year. There are many different 1099 forms for different types of income. 1099-NEC is for contract work, 1099-K is if you’re paid via a third party (PayPal or Amazon). Expect to receive your 1099 between the end of January and mid-February.
- Deduction Documents. Deductions help reduce your taxable income, which can mean a lower tax bill in most situations. The key to claiming deductions is documentation – not only can it protect you if you’re ever audited, but it can also cut your tax bill by helping you remember what to claim. Deduction documents can be things such as: charitable donations, educational expenses, medical bills, etc. Check with your local tax professional to understand what you can claim as a deduction.
- Credit Documents. Credits can be viewed as a more valuable deduction. They provide dollar-for-dollar cuts in any tax you owe. Many of the popular tax credits include: Child tax credit, American opportunity and lifetime learning credits, retirement savings contributions credit (also known as the saver’s credit).
- Decide Who Will Prepare and File Your Taxes
2022 may have been a year of change. If you got married or divorced, started a new business or claimed unemployment benefits, this tax season may be a little more complicated than years past. If this applies, you might need to consider hiring a CPA or other tax professional to prepare and file your taxes. Do not wait until April to reach out either. As April gets closer, many tax professionals will charge more if their calendar is available. As a member of Legacy Credit Union, you are able to save up to $15 on federal products through TurboTax.
If you cannot afford to hire a tax professional or don’t feel comfortable doing your own taxes, there are many affordable options to prepare your taxes.
- Free File Alliance is a coalition of tax software companies that partner with the IRS to help U.S. taxpayer e-file their returns. Your adjusted gross income cannot exceed $72,000 a year to qualify for the service.
- The Volunteer Income Tax Assistance program (VITA) uses IRS-certified volunteers to offer free basic tax preparation and e-filing to people who earn less than $57,000 a year, people who are disabled or whose English is limited.
- The AARP Foundation Tax-Aide offers tax-preparation assistance to people 50 or older or those who can’t afford a professional tax preparer.
- The IRS also has a tool option to find a location for Free Tax Help. It is as simple as entering in your ZIP Code.
- Important Days to Remember
Technically, the first day to file your taxes was January 3, 2023. However the IRS did not start processing the tax returns until January 23, 2023.
Taxes are due on Tuesday, April 18. But what happens if you file your taxes late?
- If you’re getting a refund, you won’t be penalized. If you’re expecting to get a refund, the good news is that the only consequence of submitting your return after the deadline is that you’ll get your refund late.
- If you owe taxes, you’ll pay a penalty and interest. Keep in mind paying late comes with consequences. For every month that you file late, you’ll have to pay an additional 5 percent penalty on the total amount you owe. It’s important to note that a month does not mean a full 30 days to the IRS – filing your return even one day late means you will still be hit with the full 5 percent penalty. On top of that, you’ll also pay interest, which will only add to your fees. If you file more than 60 days late, things can again become more difficult and costly.
If you properly file an extension for your tax return, you will have until October 16, 2023 to file your taxes. The extension paperwork is due on April 18, 2023, the original date for tax returns.
- Get your Refund Faster
Instead of waiting for a check to come through the mail, there are steps to ensure that your tax refund comes to you without delay. Filing electronically and with a direct deposit is the fastest and easiest way to file and receive a refund. Once you have everything needed to file a true return, individuals can use a bank account, prepaid debit card, or mobile app to use direct deposit and will also need their routing and account numbers with their return.
Most taxpayers that are receiving a refund can anticipate their refund coming within 21 days of when they file electronically, if they choose direct deposit and there are no issues with their tax return. If you are wanting to know where your refund is, the IRS.gov has the page Where’s My Refund? to allow you to check where your personal refund is. While the IRS began accepting returns on Jan. 23, 2023, the IRS cannot issue a refund that includes the Earned Income Tax Credit or Additional Child Tax Credit (ACTC) before mid-February. The IRS reports they believe most EITC/ACTC related refund to be available in taxpayer’s bank accounts or on debit card by February 28.
For additional information, you can always visit IRS.gov to find easy-to-use online tools that are available anytime. You can use them like many tax payers to help file and pay taxes, find information about their accounts, determine eligibility for tax credits and get answers to tax questions.