Tax season 2023 is more complicated than previous ones due to changing credit guidelines and other issues. Don’t worry about working with professionals, especially if it is the first time you file, or your tax status is intricate. It is always advantageous to start tax preparation soon to avoid many headaches later. This article will discuss some ways to make tax season more comfortable.
When does tax season 2023 start, and when does it end?
According to the IRS, the tax season 2023 will begin on Monday, January 23, and the agency will accept and process returns for 2022 from that date. The deadline for this tax season is April 18, which is famous as Tax Day around the US. Due to the calendar, fortunately, people have 3 additional days to pay taxes this year. The IRS has taken many essential measures this year to increase the security of taxpayers. The agency has also hired more staff to support taxpayers smoothly.
What can we do to make the tax season easier?
You can make tax season much more comfortable if you implement some methods and procedures. Here are 8 ways to have less stress during tax times:
1- Start as soon as possible
Although the IRS has many employees this year, working with so many returns from individuals around the country is still challenging and confusing. If you behave in a way that your return goes for a review, some unpleasant delays will probably occur for your tax refund. It is better to prepare your tax return as early as possible to avoid these types of issues. E-filing is the best available option to prevent delays and many other problems because, in this case, you will directly deposit with the IRS. If your tax return is challenging, gather all the required data and documentation early and engage help to get practical ideas and solutions from tax professionals. The sooner you begin the procedure, you will have more time to handle the issues and track the missing info.
2- Avoid inaccuracies in your tax return
Try to deliver an accurate return because inaccuracies open the door to an IRS audit. The IRS checks all the provided information in your return and compares it with the available info on forms from employers, clients, and other documentation. If there is any discrepancy between your provided report with what is on file for the IRS, the manual review will start, and it can cause delays in your tax refunds. So double-check your return for inaccuracies and try to prepare accurate tax returns. It is always wise to go to the IRS website and receive your tax transcript as a digital copy before the tax return preparation.
3- If you need an extension, have an early plan for that
If it is not possible for you to provide your tax information on the due date of April 18, you can delay the deadline to October 16 by filing an extension. The IRS expects good estimation from you, and you need to be quick to prevent penalties and interests. Always keep yourself updated about the IRS deadlines for 2023 and act beforehand.
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4- Be tuned for new rules
Credits and deductions can permanently affect your tax bill or tax refund
significantly, so pay close attention to them. You need to check the current available things and see if you are eligible for deductions or credits. To reduce your tax bill, you must consider topics like a child tax credit, earned income tax credit, clean energy vehicle credits, charity donations, and many more.
5- Remember that Form 1099-K is for 2023
A new law is to report payments processed by digital payment companies like PayPal. You need to report transactions from these third-party companies through Form 1099-K throughout 2023. The implementation of this new regulation is for 2023, and you don’t need to be worried about it for 2022. But you still need to report income from gig work, sales of products, and transactions from various businesses. It is a great idea to ensure that your accounts on third-party companies like PayPal and Venmo don’t record your private transactions as a business.
6- Remember to report the profits and losses of your investments
Capital gains taxes are challenging for many individuals because they are not based on the value of your investment but on the profits you make. You wouldn`t owe this type of tax if you did not sell any assets in 2022. However, you need to report the profits and losses to the IRS if you have sold any investment asset like stocks, cryptocurrencies, real estate, and more. In the case of failures on investment, you can utilize them to offset your gains. You are allowed to deduct up to $3000 in losses against your average income. You can also transfer up to $3000 loss to future years to offset the gains.
7- Be organized and create categories
Strict organization can lead to less stress in tax season; it is not easy, though. Keeping all your receipts and documentation organized is painful, but it will bring peace of mind when the tax season approaches. Recording the actual pieces of paper is not wise because they will crumble and fade after a few months. You need an electronic filing system to avoid any problems in the future. Various platforms help you create this system. A significant amount of space and a searchable database will be provided for you through this method.
Create categories for your receipts and expenses in your electronic filing system. Make folders for everything and put them under the correct classes to avoid later trouble. So you can easily access all your files, and it won’t be time-consuming to search for a document. This process is beneficial in the case of audits from the IRS because it is masterfully transparent.
8- Always update your records
It is a fantastic tip to update your records throughout the year constantly. Many changes will occur during a year; for instance, employees get divorced, or contractors will appear and go. The databases or records from the previous year might not be reputable for the current year and keeping them updated is always a practical idea. Please don’t postpone the updating process to the last minute because it’ll be so stressful. Make amendments where necessary and ask your employees or contractors to review the correctness of their details. So you have an appropriate database that is entirely ready for the tax season.
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