Tax filing guide and tips for 2023 season

Tax Filing Guide and Tips for the 2023 Season

The arrival of a new year means Americans must complete the annual chore of filing federal tax returns reporting the prior year’s income and determining refunds or tax owed. Proper tax filing requires assembling records, understanding deductions, navigating forms, and meeting deadlines. This comprehensive tax filing guide covers key dates, documents, strategies, common mistakes, FAQs and tips to maximize refunds and smoothly file by the April deadline.

Key Dates for 2023 Tax Filing Season

The following are important dates for U.S. federal income tax filing this season:

January 23 – First day the IRS begins accepting and processing e-filed returns
February 3 – First refunds issued for returns claiming earned income tax credit or additional child tax credits
April 18 – Tax filing deadline for filing 2022 individual tax returns or applying for extension
April 18 – First quarter individual estimated tax payments for 2023 are due
October 16 – Extended filing deadline for taxpayers who obtained extensions (must still pay tax owed by April 18 to avoid penalties)
December 31 – Last chance for deductions and tax planning moves that can impact 2022 liability

Mark your calendar and file as early as possible to allow time for any IRS corrections or information requests.

Documents Needed to File Taxes

Collect these records to accurately file your taxes:

Forms W-2 showing wages and withheld taxes from each employer
1099 forms reporting income from side gigs, investments, retirement plans or other sources
Social Security statements confirming benefits received
Receipts or summaries supporting deductions claimed
Statements showing profits and losses from any business owned
Records of alimony paid or received with the ex-spouse’s name and SSN
Forms 1098 showing mortgage interest, student loan interest and tuition paid
Brokerage tax reports summarizing investment transactions
Prior year tax returns providing carryover data if amending

Having all documentation in order expedites filing accurately and maximizing eligible deductions.

Choosing Tax Filing Status

Filing status determines deduction amounts, tax rates and eligibility for certain credits. Evaluate which status fits you:

Single – For unmarried taxpayers
Married Filing Jointly – For legally married couples, provides greatest deduction amounts
Married Filing Separately – For married couples wishing to file individually, limits credits eligibility
Head of Household – For unmarried taxpayers maintaining a household for dependents
Qualifying Widow(er) – Surviving spouses with dependent child can use joint tax rates for two years

Consider impacts of changed status following life events like marriage, divorce or having dependents. Married filing jointly frequently provides the greatest tax savings.

Maximizing Tax Deductions

Claim all possible deductions to reduce taxable income:

Mortgage interest – Reported on Form 1098, eligible for loans up to $750,000
Property taxes – Reported on Form 1098, limited to $10,000 following 2018 tax law change
Charitable donations – All contributions require documentation like receipts from organizations
Medical expenses – Total medical expenses must exceed 7.5% of income to qualify
State and local taxes (SALT) – Limited to $10,000 following tax law change
Home office – Calculate deduction amount using percentage of home used for business
Retirement contributions – All pre-tax 401(k), IRA, HSA contributions reduce taxable income
Student loan interest – Reported on Form 1098-E up to $2,500 deduction limit
Educator expenses – Up to $300 of teacher out-of-pocket classroom supply costs

Review records to identify all potential write-offs. Underused deductions go wasted each year.

Claiming the Standard vs. Itemized Deductions

Taxpayers can either claim the standard deduction or itemize eligible expenses. Compare both calculations to determine the optimal deduction method:

For 2022, the standard deduction amounts are:
- $12,950 for single filers
- $19,400 for head of household
- $25,900 for married joint filers
If your total itemizable expenses like mortgage interest, state and local taxes, and charitable gifts exceed the standard deduction for your filing status, itemizing saves more tax.
With the cap on state and local tax deductions, more taxpayers now opt for the standard deduction but always run the numbers.

Use the method resulting in the largest deduction unless ineligible to itemize due to high income phase outs.

Ways to Reduce Taxable Income

Lower tax bills through pre-tax contributions and health accounts:

Max out pre-tax 401k contributions through employer paycheck deductions
Make deductible traditional IRA contributions up to income limits
Contribute to tax-deductible Health Savings Accounts (HSAs)
Utilize Flexible Spending Accounts (FSAs) for healthcare costs and dependent care
Make charitable contributions via payroll deduction using donor-advised funds
Incur work-related expenses that can be claimed above-the-line
Pay January mortgage payment and state taxes in December

Reducing current year taxable income legally minimizes taxes owed.

Claiming Child-Related Tax Benefits

Have children? Don’t miss tax-saving credits and deductions:

Child Tax Credit – Up to $2,000 per child under age 17, phase out begins at $200k/$400k AGI
Child and Dependent Care Credit – Up to 50% of $8,000 ($16,000 for 2+ kids) of child care costs for kids under 13
Earned Income Tax Credit – Refundable credit up to $6,935 for low/moderate income families
Adoption Credit – up to $14,890 credit for qualifying adoption expenses
Child support paid – Noncustodial parents can deduct child support paid, submit Schedule 8812

File forms tying dependents to your tax return. Provide dependent Social Security Numbers.

Claiming Education Tax Benefits

Don’t lose out on valuable education credits and deductions:

American Opportunity Credit – $2,500 partially refundable tax credit (up to $1,000) for undergrad expenses.
Lifetime Learning Credit – Up to $2,000 credit for any level college tuition and vocational schools
Student Loan Interest Deduction – Deduct up to $2,500 of student loan interest if income under $85,000
Tuition and Fees Deduction – Up to $4,000 above-the-line deduction for school expenses
529 Contributions – Contributing to a 529 plan may qualify for state tax deductions

Reduce your tax bill while offsetting educational costs by claiming opportunities for which you are eligible.

Reporting Self-Employment and Gig Income

Tax obligations differ when self-employed. Key points:

Report income and expenses from freelance work and side gigs on Schedule C, Schedule C-EZ or Schedule K-1
Business expenses like home offices, supplies, internet and mileage are deductible
You owe payroll taxes to fund Social Security and Medicare. Calculate these using Schedule SE.
Make quarterly estimated tax payments on self-employment income to avoid underpayment penalties
Save documentation like invoices and receipts to support income and deductions for audit protection
Carry over or carry back business losses if income fluctuates year to year

Careful recordkeeping and estimated tax payments are vital when self-employed. Consider enlisting a tax professional.

Filing Cryptocurrency Taxes

Virtual currency trading carries major tax implications:

You owe taxes on all crypto profits determined in U.S. dollars at time of transaction
Trading or exchanging one crypto for another is a taxable event
Track basis in each currency, acquisition dates, fair market values, gains/losses
Losses can offset gains plus up to $3,000 in additional income
Failure to report crypto transactions accurately carries big penalties
Dedicated tax software like CoinTracker can import trades and autogenerate required reports

Meticulous cryptocurrency tax reporting is complex but required – track closely and run the numbers with a tax professional.

How to File for an Extension

If more time is needed to prepare your return:

Submit Form 4868 by the April filing deadline for an automatic 6 month extension
Most states also offer extensions but you must request separately
Pay any anticipated tax owed by the April deadline or face penalties on the unpaid amount
Make first quarter estimated tax payment for upcoming year with the extension to avoid penalties
Be conservative with extension payment amounts to avoid another tax bill in October
An extension provides more time to file only – not additional time to pay

File extensions electronically if cutting it close, but aim to avoid needing them with early preparation.

After Filing: Paying Tax Debts

Options if unable to pay full owed tax amount:

Installment plans – IRS monthly payment plans with variable terms and interest charges
Credit card payments – The IRS allows charging taxes owed on approved credit cards for fees
Personal loans – Unsecured loans or home equity loans allow consolidating tax debts at lower interest
Offer in compromise – The IRS may settle tax debts for less than full owed in certain hardship situations
Bankruptcy – Filing for bankruptcy can discharge income tax debt in specific circumstances only

Don’t panic if unable to pay taxes by April. Contact the IRS promptly to discuss payment options. Maintain filing compliance.

After Filing: Expecting a Refund

If due a tax refund, tips to speed payment:

E-file and select direct deposit to get refunds faster. Paper returns take weeks longer.
Double check bank account and routing numbers entered to avoid rejected deposits.
The IRS Where’s My Refund tool shows processing status typically within 24 hours of e-filing.
Most refunds issue within 21 calendar days of e-filing unless additional IRS review is required.
Split refunds across multiple accounts by requesting up to 3 direct deposits using IRS Form 8888.
The IRS cannot issue refunds before mid-February for returns claiming certain credits.
Failure to file creates lost opportunity for refunds. The IRS only holds refunds for 3 years.

Getting tax overpayments back into your hands quickly is the bright spot of tax season.

Common Filing Mistakes to Avoid

Sidestep these errors through attentive filing:

Math miscalculations resulting in incorrect tax liability
Typos and transposition mistakes entering SSNs and figures
Forgetting to sign paper return forms before mailing
Filing before receiving all tax statements like Form 1099s
Not claiming available deductions and tax credits you qualify for
Errors claiming dependents – must provide SSN for each
Filing incorrect status or ages, especially when status changed
Not reporting all taxable income sources
Errors in reporting investment activity or capital gains

Double and triple checking return data accuracy before submitting prevents amendments and delays.

Tax Filing With a Professional

Consider enlisting help with taxes if:

You are a high income earner
You have complex filings like rental property or self-employment
You lack time for self preparation learning curve
You need planning for major life events or windfalls
You have relocated across state lines or countries
You want to maximize outcomes through strategic deductions
You seek audit protection provided by CPAs and attorneys

For simple filings, the cost of tax preparation services often outweighs the savings benefit. Weigh options.

Conclusion

Proper annual tax filing is both a civic duty and an opportunity to claim credits and deductions to minimize liability. Use this tax season to build efficient filing habits that make the process smooth each year. Get organized early, maximize write-offs, and avoid common mistakes. Consider enlisting professional help if your situation involves complexity or high income. Maintain immaculate records so you are audit-ready. File on time or promptly request an extension. With preparation and knowledge, you can master tax filing season.

FAQs

How long should I keep tax returns and records?

The IRS recommends keeping tax returns and supporting documentation for at least 3 years after filing. However, keeping 7 years of records is ideal for audits or amending previous returns.

Where do I mail a paper tax return?

Paper tax returns should be sent to the IRS service center in the state where you live. Envelopes should be addressed to “Internal Revenue Service” followed by the service center’s city and state. Include a Form 1040-V payment voucher if sending a check.

What if I made a mistake on a filed tax return?

Notify the IRS if you notice an error on a filed return. For minor issues, they may make corrections without requiring an amended return. For substantial mistakes, file an amended return using Form 1040-X within 3 years of original filing.

Can the IRS take your refund to cover unpaid taxes?

Yes, the IRS can levy your tax refund to pay any outstanding balances like past due taxes, student loans, child support or other federal debts. You will be notified if your refund is offset against obligations.

How long does the IRS have to audit my return?

For timely filed returns, the IRS generally has 3 years from the date of filing to initiate an audit. If substantial underreporting of income exceeds 25%, they have up to 6 years to commence an audit. There is no time limit if no return is filed at all.

When should I expect my refund?

E-filing with direct deposit typically results in refunds being issued within 21 calendar days of the IRS receiving your return. Paper filed returns require more processing time and refunds generally take 6-8 weeks. Track status online.

Careful filing and diligent documentation prevents headaches if the IRS inquiries about your tax return. Paying any taxes owed protects your interests and compliance status.