- The IRS warns that your next tax return could be smaller.
- Americans are already squeezed by inflation and face a potential recession.
- So it’s even more important to make sure you get every penny of your refund. Here’s how.
Consumers, already squeezed by the highest inflation in a generation and facing a potential recession, may not even have a fat tax refund to look forward to in 2023. That’s why there will be It’s important to pay even more attention to your return to make sure you get the biggest tax refund possible, accountants say.
The IRS warned on Tuesday that tax refunds could be lower because there were no stimulus payments in 2022. Additionally, it noted a pandemic-era exception in 2020 and 2021 that allowed to those taking the standard deduction to claim a tax deduction of up to $300 for cash donations to charity were not extended. Again, the only way to deduct charitable donations is to itemize them.
This can be alarming for millions of Americans who rely on tax refunds for major purchases, savings, investments, or debt repayment. In 2022, 46% of taxpayers said they rely on their refunds to do some of these things, a LendingTree survey showed.
Tax experts say, however, don’t worry yet. “There are still plenty of tax benefits, credits, deductions, and plenty of ways to pay the minimum amount of tax you owe and get the largest refund possible,” said Mark Steber, director of tax at Jackson Hewitt. .
What are the basic tax preparation steps to follow now?
- Get organized. “You don’t have to be super organized with a filing cabinet and file valet,” Steber said. “A simple shoebox or large envelope method will work. Just being organized can help make your tax return more accurate and less stressful.
Organize your information into four simple sections:
- Income items
- Deductions and credits
- life changes
- Last year’s tax returns.
- Prepare your help. Taxes can be complicated and difficult to understand, so make sure you or your tax professional are taking advantage of good tax technology when doing your taxes. If you hire a professional, make sure that person is trustworthy, trained and experienced.
What are the tax changes you need to know about this year?
- People who have part-time jobs, side hustles, or just sell occasional merchandise on Etsy or eBay will need to be vigilant for Form 1099-K. Anyone who sells $600 or more in a calendar year of services or goods and accepts payments through third-party networks, such as Venmo, PayPal, or debit or credit cards, will receive a 1099-K with these transactions, and you have to report that income or risk an automatic notice from the IRS or even an audit, said Ryan Losi, executive vice president of PIASCIK, a chartered accounting firm.
This change came with the passage of the American Rescue Plan Act of 2021. Previously, the reporting threshold was for taxpayers with more than 200 transactions with a total value greater than $20,000.
- Charitable donations can only be reversed if you itemize your deductions. This contrasts with the past two years when those who took advantage of the standard deduction could claim a tax deduction of up to $300 for cash donations to charity.
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What are some tips for reducing your tax bill or getting a bigger refund?
- Check eligibility for premium tax credit, a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased in the health insurance market. A refundable credit means that if the credit exceeds the amount of taxes due, you are refunded the difference.
For the 2021 and 2022 tax years, eligibility has been temporarily expanded by eliminating the rule that a taxpayer whose household income is greater than 400% of the federal poverty level cannot qualify for an income tax credit. premium tax. If you received unemployment benefit during the year, your income is automatically eligible.
- Check eligibility for clean vehicle credit. Until December 31, buyers of certain electric vehicles can benefit from the federal tax credit of $7,500.
- Crop losses. Look through your investments and you’ll likely see some losses this year. If you sold at a loss, you can use it to reduce your taxable capital gains and potentially offset up to $3,000 of your ordinary income.
“If you have more losses, the excess will be carried over and you can use it next year,” Losi said. Don’t forget to use them, he said.
How long do I have to file my taxes?
Accountants give advice every year – file as soon as possible once tax season opens, usually at the end of January. Here’s why, according to Steber:
- Typically, three out of four taxpayers receive a refund each year, and 2022 will likely be the same. So deposit early, get your money early – it’s that simple
- If you file early, you lock up your personal data with the IRS and the states, so no one can file a false tax return and try to steal your refund.
- If you file early and your tax professional finds another deduction or credit that may require new or more data, you have time to get those documents and you won’t face any last-minute delays.
- If you owe money and file early, you can still pay at midnight on the last day taxes are due while still filing your tax return and protecting your data. You don’t have to file your income tax return and pay your taxes at the same time.
The IRS warned this week that taxpayers should not count on receiving their tax refund this year by a certain date, especially when making large purchases or paying bills, as some returns may require a additional review and may take longer.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at firstname.lastname@example.org and sign up for our free Daily Money newsletter for personal finance tips and business news Monday through Friday mornings.
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