Once the new year begins people often ask, “When is tax season and how should I prepare?” Tax season typically refers to the period in which individuals and businesses file their income tax returns for the previous year. Tax season in the United States typically begins in January and ends in mid-April.
In 2023 the IRS will accept tax returns January 23 through April 18. It’s important to note that tax season may differ depending on where you live. Be sure to file your tax return on time and pay any taxes owed by April 18 to avoid penalties and interest charges.
Now that you know when tax season is, consider what you need to know about filing taxes. To help eliminate the stress that comes with taxes, use the preparing for taxes checklist found in this article.
What to know about filing taxes
Filing taxes is an important responsibility that individuals and businesses must fulfill each year. The following explains what to know about filing your taxes.
Who needs to file
Individuals who earn an income in the United States are required to file a federal tax return. The threshold for filing depends on several factors such as age, filing state and income level. You may also need to file state and local tax returns depending on where you live.
The IRS provides a range of tax forms for individuals and business use. The most common for individuals is the Form 1040. Depending on your situation, you may need to file additional forms such as the Schedule A for itemized deductions, the Schedule C for self-employment income or the Schedule D for capital gains and loss.
If you owe taxes, you’ll need to make a payment by the deadline. You can make a payment online, by phone or by mail. If you can’t afford to pay the full amount owed, you may be able to set up a payment plan with the IRS.
Deductions and credits
There are a variety of deductions and credits to help lower your tax bill. Read the preparing for taxes checklist below to learn more.
Filing taxes can be complicated especially if you have a complex tax situation. Consider hiring a professional tax preparer to assist you in preparing your tax returns. Alternatively, you can use tax preparation software to help file your taxes.
Preparing for taxes checklist
You may be surprised how much time you’ll save when you plan ahead and organize your information before tax season. One helpful way to make preparing your taxes easier is conducting an annual financial review. Read our blog about how a financial review can help your personal finances. Whether you do your own taxes or hire a professional, you’ll need specific information and documentation to file your tax return. This preparing for taxes checklist includes gathering your personal information, income, deductions and credits.
This information includes the more obvious items that you’ll need for any tax prep.
- Last year’s taxes: If applicable, both your federal and state tax return will be important to have handy. They can be used as good refreshers of what you filed last year and the documents you needed or used.
- Social Security and/or tax ID number: You’ll need these identification numbers ready for yourself, your spouse and all other dependents like children. In some cases, dependents can include elderly parents.
- IP PIN: You, you spouse or a dependent will need to have your IP PIN ready if you have been issued one by the IRS. Your IP PIN prevents someone else from filing a tax return using your Social Security number or Individual Taxpayer Identification Number. Get an Identity Protection PIN from the IRS.
By providing these documents you’ll confirm the money you received during the previous year.
- W-2 forms: Keep an eye out for both a physical and electronic copy of your W-2 from your employer. Employers must mail out your W-2 by January 31.
- 1099 forms: A 1099 form shows record of any entity or person other than your employer that gave or paid you money.
Before you file, make sure you have the right documentation for each of these popular tax deductions. Deductions can help reduce your taxable income which could lead to a lower tax bill.
- Retirement account contributions: You can deduct contributions to a traditional IRA or self-employed retirement account if you stay within the contribution limits.
- Educational expenses: Students can claim a deduction for tuition and other fees. For the IRS to accept your deduction claim you will need a 1098-T form. This shows your education transactions. A 1098-E form will have details on your student loan.
- Medical bills: If your medical bills total more than 7.5% of your adjusted gross income you may qualify for tax savings. You should also be aware if you need to use an HSA form. Learn more about the purpose of an HSA form at HealthCare.gov.
- Property taxes and mortgage interest: If your mortgage payment includes an amount escrowed for property taxes, it will be included in the 1098 form that your lender will send you.
- Charitable donations: Make sure your generosity pays off during tax season by keeping the receipts from your charitable donations.
- State and local taxes: Other taxes like state or local income or sale taxes can be deducted as long as it’s not more than $10,000 including property taxes.
Tax credits provide taxpayers with a dollar-for-dollar reduction on your tax bill. Tax credits are either nonrefundable, refundable or partially refundable. This is how the credit will be applied to your tax bill. Typically, tax credits are nonrefundable.
- American lifetime opportunity learning credits: Just like tuition and fees reduction, education related credits can save you some money when you use a 1098-T form.
- Child tax credit: Individuals with kids under the age of 17 may be eligible to claim a tax credit of up to $2,000 per qualifying dependent when they file their 2022 tax returns in 2023. Families who adopted children in the last year may be eligible for additional tax credits.
- Retirement savings contributions credit: If you make contributions to a 401(k), similar employer-sponsored plan or an IRA you may be able to claim this credit as well.
Overall, filing taxes is an important task that requires paying attention to detail and adherence to deadlines. Be sure to stay organized and seek professional help if needed. Lastly, don’t forget to plan and research when is tax season each year. Hopefully you find this preparing for taxes checklist helpful to file your taxes correctly and avoid any potential penalties.
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