The 2023 tax season has begun, so it’s that time of the year when you get your tax documents ready for filing your return for 2022 income. Whether you prepare your taxes yourself or have a specific tax professional that you use each year, it doesn’t hurt to be aware of some tips when filing your taxes. These pointers can save you money, make the tax filing process easier or both.
Tip #1: You May Not Need Your Third-Party Payment 1099-K Forms
For many taxpayers, Form 1099-K comes into play when they receive potentially taxable income through third-party network transactions, like PayPal or Venmo. Until recently, the threshold for generating the 1099-K has been at least 201 transactions that produce gross payments that exceed $20,000.
Thanks to the American Rescue Plan of 2021, this threshold was dramatically reduced to any number of transactions that produce gross payments above $600. This new threshold was to take effect for the 2022 tax year, but the IRS announced that it was delaying the implementation of this new rule. As a result, any 1099-K generated for the 2022 tax year would follow the older $20,000/200+ transaction threshold.
Tip #2: Try to File Your Taxes Early
Procrastination isn’t helpful for many things in life and filing your taxes is no exception. Besides having to potentially pay a Failure to File Penalty, waiting to file your taxes also delays when you might receive your tax refund.
If you’re planning on hiring someone to help prepare your tax returns, filing early may depend on contacting them early this year and locking in an appointment or consultation date as soon as possible. Tax professionals usually get busier as it gets closer to April.
Tip #3: Take Advantage of Retirement Account Contributions
For 2022 tax purposes, the deadline to contribute to a 401(k) passed on December 31, 2022. Despite this, you can still make 2022 contributions to your Roth or traditional IRA until April 18, 2023 (which happens to be this year’s tax return filing deadline).
Tip #4: Consider Filing Your Taxes Yourself Using the IRS Free to File Tool
There are plenty of benefits to hiring a tax preparer to help you with your tax returns, but if you think you can prepare them yourself, think about preparing and filing them electronically. The IRS’ Free to File program allows you to not only file your taxes electronically for free, but also use certain versions of tax preparation software for free.
Not everyone is eligible to use this service, as you’ll need an adjusted gross income of $73,000 or less for the 2022 tax year.
Tip #5: Gather Your Tax Documents
Yes, you’ll need your W-2, 1099 and other tax forms. But you should also have other documents handy that are necessary to complete your return. These can include:
- Mortgage interest and property tax documents
- Charitable donation receipts
- Retirement account contributions
- State and local tax documents
- Form 1095-A, Health Insurance Marketplace Statement
Following the above steps will help ensure the tax filing process in 2023 goes as smoothly as possible. If you have more complicated tax issues, you might need more in-depth advice and guidance. In these situations, don’t hesitate to get in touch with a tax attorney or CPA.
Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!