Finance

Here are 3 moves before the 2023 tax filing season opens

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Get tax preparation help

One of the first things to consider: Are you going to file your taxes yourself this year or tap a professional to file on your behalf?

If you’re planning to hire a tax preparer, January is a good time to find someone, said certified financial planner Anna Sergunina, president and CEO of MainStreet Financial Planning in Los Gatos, California.

“Don’t wait until March,” she warned. “They most likely won’t be taking on new clients this late in the tax season.”

For those looking for tax software, it may be a good time to compare your choices, including the IRS Free File, an option if your 2022 adjusted gross income is $73,000 or less.

Take steps to lower your 2022 tax bill

While many tax planning opportunities disappear after the end of the year, experts say there are still a few ways to lower your 2022 tax bill.

“I believe there is tremendous value in thinking ahead and coordinating your tax and financial planning strategies,” said Judy Brown, CFP and senior financial advisor at SC&H Group in the Washington, D.C. and Baltimore area.

I believe there is tremendous value in thinking ahead and coordinating your tax and financial planning strategies.

Judy Brown

senior financial advisor at SC&H Group

For example, the estimated tax payment for the fourth quarter of 2022 is due on January 17, which can lower your tax bill or reduce late payment penalties.

You can also make contributions to individual retirement accounts until the April 18, 2023 tax filing deadline, said Brown, who is also a CPA. While Roth IRA deposits don’t provide a deduction, you can get a tax break with pre-tax IRA contributions, depending on your income and participation in a workplace retirement plan.

You can also claim a deduction for 2022 by making a contribution to a health savings account by the tax deadline, assuming you’re enrolled in an eligible health insurance plan.

Get organized with a tax form checklist

Ajay Kaisth, CFP and principal at KAI Advisors in Princeton Junction, New Jersey, says it’s time to get organized with the tax forms needed for your 2022 return.

“If you haven’t already done so, review last year’s records and make a checklist of the forms” you expect, he suggested. Common forms may include V-2s from your job and 1099-NEC forms for contract employment, 1099-G for unemployment income, among others.

With a brokerage account, you can also receive a 1099-B for capital gains and losses and a 1099-DIV for dividends and distributions. For deductions, you can have a 1098 for mortgage interest, a 5498 for individual retirement account deposits, a 5498-SA for health savings account contributions, and more.

How to recover from holiday debt

You should wait to file until you have copies of each form you need. Known as “information returns,” a copy of these forms is sent to the IRS and the taxpayer each year. If your tax return does not match the forms, the tax system may send an automated notice, which may take time to resolve.

“If you’re not sure if something is important for tax purposes, it’s better to keep the documentation,” Keast added.

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