By Ashley Ann Reich
I have yet to meet a person that enjoys tax season – well, perhaps anyone other than an accountant. Whether you are someone that looks forward to doing taxes or you dread this time of year (like most!), it is one of those required yearly activities as an adult. The year 2023 came with many new changes, and the same is true for the tax code. If you have yet to file your taxes, you still have several weeks before the 2023 federal filing deadline of April 18th. Let’s talk about some of the changes this year as well as some tips for filing your taxes efficiently and how to be in the best position possible, whether you have to pay taxes or if you are owed a refund.
Remember the days of filing your taxes by hand? I certainly have filled out a few paper tax forms in my life, but thankfully, tax software has improved the efficiency of filing taxes and assisted with ensuring you are getting the most out of available credits and deductions from the past year. One of the most popular tax software is TurboTax by Intuit. Personally, I have used this software for many years and have found it to be easy to navigate and helped me navigate through tricky tax situations. Additionally, it allows you to pay for audit coverage and provides discounts to military families (in many cases, it is free!). You can file both federal and state taxes through Turbo Tax.
Another software that I have used previously is Dave Ramsey’s SmartTax by TaxSlayer. The software is easy to navigate and is low-cost in comparison to other products on the market. Another unique aspect of this software is you can upgrade to receive a free financial coaching session through Ramsey Solutions upon filing your taxes. This software also allows for federal and state filing and does not have any hidden fees.
Changes for 2023
Navigating your tax situation can be daunting, but most tax software will make it easier for you to determine what you qualify for in terms of tax credits and deductions. There were several notable changes for 2023 –
*Note: this is not an exhaustive list of changes
- The standard deduction increased to $12,950 for single filers and to $25,900 for those filing married filing jointly. Head of household and married filing separate filers also saw a jump in their standard deduction.
- The income tax brackets increased for all filing statuses in 2022 to account for inflationary changes.
- Medical deductions changed to allow you to deduct any medical expense over 7.5% of your adjusted gross income1.
- The Earned Income Tax Credit increased and was adjusted for inflation and will carry forward for your 2023 taxes.
How to Prepare to File
Taxes are often a process that provides anxiety and some element of mystery regarding whether you are set to receive a refund or if you will end up owing Uncle Sam. There are several ways to prepare yourself ahead of time to lower your stress level when you sit down to file.
- Gather all W2’s from your employer(s) and all other documents related to charitable giving, retirement, mortgage statements, and any 1099s. I have found that printing copies of each item help as a visual when entering information. The software products mentioned earlier in this article allow for transferring data electronically for most companies to reduce human error when entering your numbers.
- Retrieve a copy of your tax return from the prior year. There will be questions that you need to answer from a prior tax year, and you will need that return to reference.
- If you are self-employed, have side jobs, or have a unique tax situation, seek out a qualified tax professional that can assist you. Trust me, it is well worth paying someone a few hundred dollars versus getting fines from the IRS.
- Set up an online account through the IRS. This will allow you to track your refund and tax records after filing.
Refund vs. Paying Taxes
I have been in both camps of receiving a refund and paying taxes – neither are great scenario, depending on how you look at them. If you are someone who continues to receive a refund from the federal government or state, you should look at your tax withholdings to ensure that you are not giving away money to the government that you could have in your pocket throughout the year.
If you are someone who ends up paying taxes, you will want to evaluate if you are taking enough money out of your paycheck, which could also include the option for extra withdrawals. If you owe taxes, there can be penalties assigned by the IRS when you file your taxes. If you receive a refund, you just allowed the government to keep your money interest-free for the entire year! Evaluate your scenario with your employer to get it as close to $0. These tips should provide a more organized, lower-stress approach to filing your taxes. Additionally, it will allow you to get a head start on preparing for future years and have a better idea of what to expect. Set aside a designated day to power through and get your taxes completed – the earlier, the better!