Simple 6-Step Guide to Filing Your 2023 Taxes
Filing your taxes: It might not be everyone’s favorite time of year, but with a little organization and a thorough checklist, preparing your individual tax return can be a smoother ride.
Perhaps you’re a W-2 employee with a straightforward return. On the other hand, maybe you’re self-employed and have 1099s and quarterly taxes to consider. Or a significant event affects your reported income.
Check out our quick guide with tips to prepare your 2023 taxes, maximize your potential tax benefits, and file everything properly!
1. Gather Your Financial & Tax Documents
Before diving into tax preparation, gathering all the necessary documents is crucial. Here’s a checklist to ensure you have everything you need:
Prior Year Tax Returns: Find your federal and state (if applicable) tax returns from last year.
W-2 Forms: Employers must provide this form to all employees, summarizing their annual income and taxes withheld. If you have more than one employer, you’ll receive multiple W-2s.
1099 Forms: If you’re self-employed or have additional income sources, like freelance work or investments, you should receive Form 1099. There are 21 versions of the 1099 for specific types of income.
Mortgage Information: Hold onto those mortgage statements—any interest paid is deductible!
Property Tax Information: Your property taxes are typically deductible, too, so gather these records.
Charitable Contributions: Retain and gather receipts for donations made to eligible 501(c)(3) during the tax year.
Education Expenses: Tuition payments and student loan interest are often eligible for deductions or credits, so collect relevant documents.
Health Savings Account (HSA) Contributions: If you have an HSA, gather records of your contributions (also deductible!).
Proof of Medical Insurance: You should also receive Form 1095 from your insurance provider, which provides evidence of your health insurance coverage. Individuals not covered could be subject to penalties.
Receipts for Deductible Expenses: Retain receipts for any other costs that could lower your tax liability, such as medical and job-related expenses.
Your employer and any other entity issuing you tax documents must send them by January 31, 2024, for the 2023 tax year. Keep in mind that many employers and organizations now use electronic methods to issue tax documentation.
Ensure your contact information, notably your address and email, are current. If you don’t receive a form because you gave the issuing entity an old email or none at all, you are still responsible for filing that information. If you don’t, you could be penalized!
2. Note Tax Filing Deadlines
The deadline for filing 2023 individual tax returns is April 15, 2024. In years when this falls on a weekend or holiday, the deadline is the following business day.
If you need more time to prepare your return, you can file for an extension, which pushes the deadline to October 15th. You’ll need to file for an extension by the April 15th deadline but won’t need to pay taxes at this time.
3. Review 2023 Tax Changes
Stay updated on any changes to tax laws, deductions, or credits that might affect your return. For instance, income brackets, deduction limits, contribution limits, or phaseout changes for the tax year. This year, there will be several adjustments for inflation, including:
The standard deduction, which will increase to $27,700 for most joint filers, $13,850 for most single filers, and $20,800 for those filing as head of household
Increases to the Earned Income Tax Credit (EITC) maximum credit amount and phaseouts
Phaseout level increases for deductions on IRA contributions, depending on your AGI and filing status
Contribution limits for health savings accounts (HSAs) and (FSAs)
A slight increase to the refundable portion of the Child Tax Credit (CTC)
And these are just a few of the tax updates! So, if you have various investments, expenses, or types of income, it’s best to speak with your CPA to ensure you minimize your liability and maximize your tax benefits.
Which leads us to the next step…
4. Claim Your Deductions & Credits
Claiming any deductions and credits available to you is pivotal to lowering your tax liability. This includes deductions for mortgage interest, charitable contributions, retirement contributions, education credits, HSA or FSA contributions, medical and dental expenses, and more.
And don’t forget the credits mentioned above! In addition to the CTC, you may be eligible for the Child and Dependent Care Credit if you paid for childcare or care expenses for dependents with disabilities.
If you’re self-employed, you can deduct numerous business expenses, such as office supplies and equipment. Is your business based out of your home? You may be able to write off the space or room of your house used exclusively for business purposes through the home office deduction.
Bottom line: Stay organized! Keep all receipts, invoices, and documents related to deductions and credits so you can easily substantiate your claims if the IRS requests documentation.
5. Decide How to File Your Taxes
So, should you file your taxes yourself, or should you work with a CPA? Consider your situation and how complicated your taxes are.
Filing your taxes online through a platform like TurboTax is convenient, cost-effective, and suitable for straightforward situations. These platforms will guide you through the process and typically come with on-demand customer support options. Certain packages even include the option to have a pro review and file your tax return.
However, if you have a more complex tax situation due to:
Multiple income sources, investments, rental properties, or international income
Self-employment
Recent life changes like marriage, divorce, buying/selling property, having children, or inheritance
IRS issues such as audits, notices, or back taxes
Working with a CPA may be the best option! Your tax pro will provide personalized advice, expertise in complex situations, and peace of mind thanks to tailored solutions and accuracy.
6. What to Do If You…
After preparing your taxes, you’ll learn if you owe or if you’re eligible for a refund. Make sure you understand your responsibility and, if applicable, get your money promptly!
Owe Taxes
You’ll know if you owe taxes and how much when filing. You will need to pay at that time, which you can easily do online through the IRS website or by check. If necessary, you may also be able to set up a payment plan. The IRS offers short-term and long-term payment plans, allowing you to make monthly payments until you’ve paid off the amount.
Receive a Refund
If you’re due a refund, filing electronically and opting for direct deposit will get you your funds much faster! The minimum timeframe for a paper return is usually at least six to eight weeks. However, online returns are typically processed in about three weeks. And opting for direct deposit mitigates waiting for a check in the mail.
Make Filing Your Taxes a Breeze
Preparing your individual tax return might seem daunting, but organization, systems, and a solid understanding of the process go a long way in easing your stress! So start by gathering all necessary documents and being aware of annual tax updates. While ensuring accuracy and compliance is essential, staying organized is half the battle.
Are you seeking a professional to get your return done right and help you reap the most tax benefits? Book an intro call with JLS Accounting’s tax team today to learn how we can streamline your 2023 tax season!