Tax Season 2023: What You Need to Know Before You File
Tax season is here again, so here's a complete guide to help you understand the tax deadlines, the difference between a tax year and tax season, and tips for a stress-free experience.
When Can I File My Taxes?
The Internal Revenue Service (IRS) usually starts accepting tax returns in late January, and the deadline for filing is April 18th, If you're unable to file your taxes by the deadline, you can request an extension to move your deadline to October 16 automatically, but you'll still need to pay any taxes owed by the original deadline to avoid late fees and penalties.
Tax Year vs. Tax Season
A tax year is the calendar year (January 1 to December 31) for which you are reporting your income, deductions, and credits on your tax return. The tax season is the period between January and April 18th when individuals and businesses can file their tax returns with the IRS.
Free File Taxes
The IRS offers a Free File program, which allows eligible taxpayers to file their taxes online for free. To be eligible, you must have an adjusted gross income of $73,000 or less. If you make more than that, you can still use the Free File software to prepare your taxes, but you'll need to pay a fee to file them electronically.
New Rules on Credits and Deduction
Tax credits and deductions can drastically reduce your tax bill or raise your refund if you are due one. The American Rescue Plan Act enhanced certain tax benefits temporarily and introduced a special provision for charitable deductions. Check the eligibility rules and deduction amounts to determine what's still available now that these programs are coming to an end.
Consider the following credits and deductions:
Child tax credit: You may have received a temporary child tax credit of up to $3,600 per qualified child in 2021, half of which was distributed as monthly advance installments. The Child Tax Credit will revert to its 2019 level of up to $2,000 per qualified child in 2022.
Child and dependent care credit: In 2021, the child and dependent care credit were worth up to $8,000 per child. It has a maximum of $2,100 in 2022.
Earned income tax credit: Earned income tax credits are generally smaller this year than last. For more information on new income eligibility and credits for 2022, contact the IRS.
Premium tax credit: If you purchased health insurance through the health insurance marketplace in 2022, the American Rescue Plan Act temporarily expanded eligibility for this benefit to include taxpayers earning more than 400% of the federal poverty line.
Clean energy vehicle credit: Tax credits of up to $7,500 remain available for eligible electric and plug-in hybrid vehicles, however, eligibility rules altered with the enactment of the Inflation Reduction Act in 2022. Before claiming the credit, check sure your vehicle purchase qualifies.
Donations to charity: Charitable contributions were deductible as a separate line item in 2021 only, even if you used the standard deduction. If you want to claim a charitable giving deduction this year, you must itemize your deductions.
Read more about tax: What Types of Receipts Will You Need to Keep for Taxes? and Why Is It Important to Keep Receipts?
- Here are some general tips to help you navigate the tax season:
- Gather all necessary documents: This includes W-2 forms, 1099 forms, and receipts for deductions.
- Use tax preparation software: This can help you get the maximum refund and ensure your tax return is accurate.
- Double-check your information: Verify that your name, Social Security number, and other personal information are correct.
- E-file: Filing your taxes electronically is the fastest and most secure way to file. Plus, you'll get your refund faster.
- Don't wait until the last minute: This can increase your chances of making mistakes and increase your stress levels.
- Pay any taxes owed: If you owe taxes, make sure to pay them by the deadline to avoid late fees and penalties.
Read more about HouseHood: What Is HouseHood? And Why You Should Use it & Why Is Storing Digital Receipts in HouseHood Efficient?
Some of the Mistakes to Avoid:
- Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.
- Unsigned forms. An unsigned tax return is not considered valid. Usually, both spouses need to sign a joint tax return, but exceptions may be made for members of the military or individuals who have legitimate power of attorney.
- Inaccurate information. You should carefully enter any wages, dividends, bank interest, and other income they received to make sure you report the correct amounts. This includes any information you need to calculate credits and deductions.
- Math mistakes: These can range from basic math to more complicated calculations. You should review your math thoroughly, or even better, use tax preparation software that checks the math automatically.
Make sure to gather all necessary documents, use tax preparation software, double-check your information, e-file, and don't wait until the last minute to file. Good luck!