Everything You Need to Know About Tax Season 2023
It’s time to start preparing for tax season 2023. Technically, you can begin e-filing by January 3, however the IRS won’t process it that soon. Filing your taxes sooner can result in a faster refund, however you can expect an official filing date from the IRS mid to late January 2023.
With job loss from COVID-19 and the changing economy, many people have turned to part-time jobs, side businesses and personal sales of goods. To handle payments from clients, third-party payment apps are used to complete transactions. Using a payment settlement entity (ESP) still requires that this income be reported through Form 1099-K. The IRS recently announced that the Form 1099-K reporting threshold will be changed to $600 and expects taxpayers to receive the form by January 31, 2023. The filing deadline for most taxpayers is currently set for April 18th, 2022.
COVID-19 brought with it unprecedented changes that will continue to affect taxpayers, accountants, and CPAs into 2023. A lot of taxpayers are still on different pages when it comes to how much money they’ve received from the IRS and when they got their hands on it.
🚨 To give you an idea… $14.4 billion in late tax-break money owed from 2021 was given to taxpayers in early November 2021 (after a 3 month delay). Read on for some organizational steps you can take to help increase the odds you’ll get your money back sooner.
💸 Despite delays, with ongoing government efforts to provide economic relief, Americans received 11% more in tax refunds in 2021 according to the IRS. This year, do your research to make sure you’re taking advantage of credits and getting the best possible refund.
🗓 Tax Season 2023 began in late January and the federal deadline is set for the April 18, 2022. No more lenient COVID extensions! So, be mindful of your time – get your important documents in order and evaluate your withholding status.
You don’t have to be a tax policy expert to plan ahead and make the most out of your tax filing. This article will review major tax policy changes and provide some tips for getting ahead of the filing process…
What’s new to consider for your 2023 tax filing
The IRS is encouraging Americans to prepare themselves for the 2023 season, and CARD wants to make sure you have the right tools. Here are a few key things to keep in mind as you begin your tax season 2023 journey…
Inflation Adjustments
The IRS released the new federal tax rates and income brackets. The marginal tax rates are staying the same, but the income limits in each tax bracket have been adjusted for inflation.
Here are the new brackets for single/individual taxpayers:
- 10%: Taxable income up to $11,000
- 12%: Taxable income between $11,000 to $44,725
- 22%: Taxable income between $44,725 to $95,375
- 24%: Taxable income between $95,375 to $182,100
- 32% Taxable income between $182,100 to $231,250
- 35%: Taxable income between $231,250 to $578,125
- 37%: Taxable income over $578,125
And here are the new brackets for married/jointly filing taxpayers:
- 10%: Taxable income up to $22,000
- 12%: Taxable income between $22,000 to $89,450
- 22%: Taxable income between $89,450 to $190,750
- 24%: Taxable income between $190,750 to $364,200
- 32%: Taxable income between $364,200 to $462,500
- 35%: Taxable income between $462,500 to $693,750
- 37%: Taxable income over $693,750
When gathering your income documentation from 2022, keep these new brackets in mind. There are also other inflation and cost-of-living adjustments to an array of other tax provisions and policies.
For example, the maximum Earned Income Tax Credit was increased to $6,935 from $6,728 for three or more children claimed, and the income limit for some of the capital gains tax rates has been raised. Standard deductions have increased to $12,950 for single filers and $25,900 for married couples filing jointly.
You can even put $2,000 more into your 401(k) in 2023! The contribution limit has been raised from $20,500 to $22,500 (or a $3,000 more for individuals over age 50, totaling to $30,000).
How will these changes affect me?
For a full list of inflation adjustments for the 2022 tax year, get your info straight from the IRS, or check out this Forbes article for some extra analysis.
Not sure exactly how these changes will affect your tax filing? That’s okay! Start by looking at previous years’ documentation, then make a list of hard questions to ask your tax professional.
Can’t afford a professional? Prefer to handle your taxes yourself? There are other resources to turn to…
Find Free Tax Help
You could qualify for free tax prep and e-filing aid through the Volunteer Income Tax Assistance Program (VITA). Through this project, IRS-certified volunteers provide tax services to lower-income, disabled, and English-limited taxpayers. Use their convenient locator tool to find free tax help near you.
There’s also Free File Alliance, a coalition of tax software companies who have banded together with the IRS to help provide free tax preparation services. Check out their website to see if you qualify for their pro-bono services.
Check on your Advance Child Tax Credits
The one-year expansion in 2021 of the Child Tax Credit has now reverted back to it’s pre-expansion level, according to an article from CNET, with a credit of $2,000 for each child under 17 on Dec. 31, 2022. Click here to find out if your child is eligible. Remember that when you file your taxes, it’s for the previous year.
Unlike stimulus payments, if your income changed in 2022, you will be required to repay any extra money you may have received in advance from Child Tax Credits.
💡 Tip: Make sure you know exactly how much money you received for these credits during 2021. Then, compare it to how much you can properly claim on your 2022 return based on your child’s age and the income phaseouts.
Here are the detailed IRS FAQs for calculating how much you’re owed in Child Tax Credit. They have also recently added a new section with information on how to reconcile your advance payments on your 2022 tax return.
If you want to get a jump on your taxes, it’s important to gather all your payment records now. However, you will get a letter from the IRS in January 2022 letting you know exactly how much you were paid in advance Child Tax Credit payments.
The Recovery Rebate Credit
Did you get all three stimulus payments? If the answer is no, you may be eligible for a new tax credit called the Recovery Rebate Credit.
To combat COVID-19 unemployment and associated costs, the IRS rolled out three Economic Impact Payments over the 2020 and 2021 tax years. This first was issued in April 2020, a second in December 2020/January 2021, and the last one in March 2021.
If you didn’t receive any one of these three checks, you may have not received your full eligible stimulus amount. To compensate taxpayers the IRS created the Recovery Rebate Credit which you can claim when you file in 2023.
Just like with your advance Child Tax Credit payments, gather all your documentation. If you didn’t save the check stubs, go back through your online banking records for your deposits.
Make sure you have the exact amount of each check you received and add up your total. Compare this to your total eligibility in order to calculate your 2022 Recovery Rebate Credit amount.
Note: Factor any Plus-Up payments you may have received into your total. Plus-Up payments are bonus stimulus checks that the IRS automatically doled out to qualifying taxpayers in addition to Economic Impact Payments.
Direct Deposit is the way to go
You might love the nostalgia of a paper check, but now that we’re in the 2022 tax season the IRS wants you to know:
The fastest way to get your refund is by setting up direct deposit.
Although this fact isn’t new, it’s important to consider if you strive to be financially efficient and eco-friendly. Did you know that it costs US taxpayers about $1 for every paper refund check issued?
All you need is your account and routing number for your bank account, debit account, or prepaid account. These two numbers can be found at the bottom of your personal checks, or by logging into your account online.
Really minimize your refund waiting time by combining e-filing (versus paper filing) and direct deposit. E-filing tools and software will give you direct deposit as a refund option and prompt you to enter your account and routing numbers.
Otherwise, give your tax preparer the information and tell them you want your refund via direct deposit this year. Using both an e-filing software and direct deposit can really increase your odds of getting your refund within the usual 21 days.
Even have the IRS break up your refund and direct deposit it to up to three different bank accounts! Set this up electronically through your tax software or use Form 8888 if you’re filing a paper return.
How to Prepare for Tax Season 2023
1. Get organized!
From your last return to your 2022 pay statements, gather all your important documents in one place.
2. Figure out who will prepare and file your taxes.
Whether that’s you, your CPA uncle, or a hired professional, decide now and stress less later.
3. Check on your withholding status.
The IRS recommends that you take a good look at inflation adjustments (detailed above) and your income to re-evaluate your withholding status each year. Here’s the IRS page on how to get it right.
4. Hold onto everything the IRS sends you.
Beginning in January every year, you’ll start receiving important letters from the IRS. Pay attention to time-sensitive instructions and don’t throw anything out – just in case.
5. Look into which credits you can qualify for.
Here’s a great breakdown of how tax credits work, and a list of which credits you should be paying attention to in 2023.
Recap...
There are lots of factors to consider as we roll through another unique tax season. Do your research, get organized and keep these changes in mind as we approach the 2023 deadline.
Take this opportunity to gather all your documents, get in touch with your tax preparer, or look into some of these DIY tax programs for individuals, and for small businesses.
⭐️ From the CARD family to yours: Happy tax season!