Tax season 2023 is almost upon us. According to the IRS, the 2023 eFile Tax Season starts in January 2023: prepare and eFile your IRS and State 2022 Tax Return(s) by April 18, 2023. If you miss this deadline, you have until October 16, 2023. However, you should at least e-File a Tax Extension if you owe taxes by April 18, 2023.
Discussing taxes is not a topic many people are overjoyed to discuss, let alone think about, especially if they have a tax liability. As a result, many taxpayers wait until the very last moment to prepare for tax season. It’s also why nearly 14 million Americans receive threatening letters from the IRS and in some collection proceedings.
To help you get ready for filing season, here are 7 ways to prepare for tax season.
Note: Contact our firm today if you already have delinquent tax filings, have outstanding tax obligations, and owe more than $10k to the IRS or state but can’t pay in full. We help people find tax relief, file years of delinquent tax returns and generally settle their tax liability for a fraction of what they owe to the IRS. Contact us today at 877-355-8010.
With that said, let’s jump into the 7 tips.
1. Understand your filing status.
The filing status determines the rate at which your income is taxed. There are five filing statuses:
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er) with dependent child
A taxpayer may be able to claim more than one filing status. Usually, the taxpayer will choose the filing status that results in the lowest tax.
2. Make sure your contact information is correct with the IRS.
- Full name.
- Old and new addresses.
- Date of birth.
- Social Security number, ITIN, or EIN.
3. Get Your Paperwork Organized as it comes in.
If you’re rushing around at the last minute to find all the paperwork you need to file your taxes, you’re making tax season harder on yourself than it needs to be. We suggest making a checklist of all the documents you’ll need to gather. Such as:
- Income from your salary/main job via a W2.
- 1099 income you might have earned throughout the year on any side gigs or one-off projects.
- Cryptocurrency account statements.
- Brokerage account statements.
- Savings accounts that earn interest.
- Did you rent or sell any real estate?
- A list of qualifying expenses and deductions you think you qualify for with proper documentation. Contact your tax expert for a list of expenses and deductions you can take.
Failing to report income or having questionable expenses are two of the most significant blunders we see with taxpayers who find themselves in tax debt or getting audited. Make sure you have documentation for everything.
4. Max out your retirement contribution.
A 401(k) plan has a higher contribution limit than a traditional or Roth IRA—$20,500 vs. $6,000 in 2022. In addition, you can contribute more if you’re 50 or older, and there are special rules if you participate in both types of retirement plans.
5. If you are a small business owner, evaluate your tax obligations, filings, and compliance
If you are a small business owner, it’s essential to start working on your tax liability management early. Consequently, you’re likely wearing many different hats, and taxes are most likely in the back of your mind. And many little things can fall through the cracks. Such as income taxes, employment taxes, self-employment taxes, sales taxes, and local tax obligations.
Most importantly, if your employees have already filled out new W-4 forms and have all your contractors turn in their W-9, you can provide them with 1099s when you are ready to file. However, there’s a likelihood they may not have turned them in yet. So make sure to get them completed before the end of the year.
If you are behind on payroll taxes or other business tax problems, contact our firm at https://thetaxreliefco.com/contact/or book your appointment online. We help business owners negotiate with the IRS or state and find tax relief.
6. Adjust your withholding taxes as needed, even at this late date.
Complete a new Form W-4, Employee’s Withholding Allowance Certificate, and submit it to your employer.
7. If you have a business and/or rental property, consider buying items (furniture, equipment, etc.) you can deduct in 2022.
The good news is you can reduce what you owe in income taxes on rental income by claiming deductions for depreciation and rental expenses, such as maintenance, upkeep, and repairs.
- Equipment is an excellent option for your end-of-year small business purchases.
- Major, Critical Expenses.
- Business Services, Including Tech Subscriptions.
- Technology Hardware.
Your tax professional should do more than take the information you provide and file your taxes. If you owe back taxes and know you won’t be able to pay, and if your tax professional doesn’t have good answers, it could be time to consult a professional tax relief firm like ours.
A tax relief firm like ours has years of experience helping taxpayers like you resolve IRS and State tax problems and negotiating the best deal on your behalf. If you owe the IRS money for 2022 or prior years, contact us for a free consultation to learn about your options. https://thetaxreliefco.com/contact/.
In short, the IRS has several debt settlement options under its Fresh Start Initiative. They are generally willing to settle with taxpayers surprised by an unexpected tax bill and can’t pay it in full.