You’ve been trying to ignore that dark cloud hanging over your head since February, haven’t you? Putting off filing your taxes just one more day, dreading working with all those instructions and numbers. We know it can seem like a daunting task, even for the seasoned filer, but we hope following these 9 tips will shine a light on the tax-filing process and make it more manageable.

It’s important to note up front that April 15, the typical date for filing your taxes, falls on a Saturday this year. As a result, the date for filing has been shifted to Wednesday, April 18, 2023. If you’ve been procrastinating, those three extra days just may be the grace period you need!

Tip #1 – Determine if you even need to file 2022 taxes (wouldn’t that be a relief?!)

Here are a few situations that exempt you from filing income taxes.

• Your gross income in 2022 was less than the minimum required to file a tax return ($12,950 for an individual under 65; $25,900 for those under 65 who are married/filing jointly)

• You are retired and your retirement income isn’t taxable.

• You had unearned income (from things like interest and dividends, unemployment compensation and income as a beneficiary of a retirement plan) that wasn’t more than $1,150 or self-employment income that wasn’t over $400.

• You can be claimed as a dependent on someone else’s return (like your parents), didn’t have unearned income over $1,150, and didn’t have earned income over $4,400. You can also be claimed as a dependent if you are a full-time college student younger than 24 that didn’t provide more than half of your own support. However, if you are 19 or older, attending school part-time only and making more than $4,400, you likely can’t be considered a dependent and will be required to file taxes (sorry about that!)

Keep in mind that even if you aren’t required to file your taxes, it may be smart to do so. For example, if you earned below the minimum but you had state and federal taxes withheld, you may qualify for a refund by filing your taxes. Worth it!

Tip #2 – Choose the appropriate filing status

Which filing status will be the most beneficial – and truthful? The options are single, married filing jointly, married filing separately, head of household, or qualifying surviving spouse. To understand what those mean and identify which status is best for your situation, the IRS provides a simple survey. Keep in mind that, on occasion, more than one of these filing statuses can be true of your circumstances, so you’ll need to figure out which one is more beneficial.

Tip #3 – Don’t rush

Ok, that may seem like unwise advice considering the looming deadline, but we’re not suggesting you take a week for each task. Instead, dividing the process into doable chunks, one or two a day, will allow you to make headway without becoming overwhelmed. The key is to map out everything you need to do (keep reading!) and then schedule 15-45 minutes each day until you have it done. Of course, that means you will need to push that cloud away and get started soon!

Tip #4 – Identify the complexity of your return

If you do have to file a tax return, you can save yourself considerable time and angst by figuring out how complex your return will be up front. If you had very straightforward earnings in 2022, the IRS form 1040 is pretty easy to fill out. On the other hand, if you had income from various sources or situations that were unique, more legwork – and forms (called schedules) – will likely be required. Once complete, the 1040 shows the taxpayer’s refund or amount due.

Here are some questions to ask to help you determine your tax return complexity:

• Did you receive any money from contract (freelance) work, dividends, interest, investment sales, or retirement distributions? If so, you should receive (or need to download) the relevant 1099 statements with your earnings or distributions (1099-INT, 1099-DIV, 1099-B, 1099-MISC, 1099-R).

• Should you itemize your deductions or take the standard deduction? This one is a biggie. Deductions aren’t the same as tax credits, which lower your bill dollar-for-dollar. Instead, deductions reduce the amount of your income that the IRS can tax, which can mean more money back in your pocket. Taxpayers can either itemize their deductions by adding up all the year’s qualifying expenses, or they can take the standard deduction, which is a fixed dollar figure ($12,950 for individuals and $28,800 for married filing jointly) that reduces the taxable income for everyone by the same amount. But you can’t do both, so it’s especially important to pick the method that’s right for you.

At a glance, you may be able to figure out if itemizing is right for you by reviewing the following list of deductions and determining if they collectively add up to more than the 2022 standard deduction. If you know right away that they will not, taking the standard deduction will save you a lot of time and give you the best refund or reduce your payment. If you aren’t sure, however, or know that your expenses were greater than $12,950 individually or $29,800 collectively, then it will benefit you to do the extra work to get the largest refund possible. Here are some of the most common expenses/contributions that you can deduct:

• Charitable contributions
• Interest paid on a mortgage, a home equity loan, or student loan (up to $2,500)
• Medical and dental expenses (minus elective procedures) that add up to 7.5% of your adjusted gross income
• Self-employment expenses such as self-employment taxes, health insurance premiums, dedicated home office space, mileage, and office supplies/equipment
• State and local taxes up to $10,000 for personal property in conjunction with sales OR income taxes
• Health savings account (HSA) contributions up to $3,650 for single filers and up to $7,300 for families
• Individual retirement account (IRA) contributions up to $6,000, or $7,000 if over 50
• Educator expenses, up to $300, for books, supplies, equipment, and training

• Did you have unique tax credit or deduction circumstances like death benefits, Medicaid waiver payments, taxable dependent care benefits, sick and family leave credits, adoption credits, education credits, electric vehicle credits, or other tax credits? Each deduction or credit adds another layer of tax preparation.

Tip #5 – Gather the needed documents and forms

Before you can file, you will need to collect all of the documents and information required to accurately complete your tax forms. Here is a list of the primary documentation you will or may need from employers, financial institutions, educational institutions, or the government:

• Previous returns
• All W-2s
• Receipts for all expenses or contributions if you are itemizing your deductions
• Relevant 1099 forms (mailed to you or downloaded) for any interest, dividends, investment sales, independent contractor work, royalties, retirement distributions, HSA distributions, forgiven debt, unemployment benefits, state tax refunds, or social security benefits
• K-1 for any income distributions from trusts and estates
• W-2G for any gambling winnings
• Form 1098-T from your educational institution for education tax credits
• Health coverage affidavit
• IRS form 1040 and instruction guide.

Many of these will require that you complete schedules or other forms to include with your return and/or place in the appropriate line of your 1040 form. For each document you receive, you can search the IRS website for the required forms/schedules, along with instructions.

Tip #6 – Choose the best method to file

If your head is already spinning from too much information, you’ll be happy to learn that since the government significantly raised the standard deduction to $12,950 per person, it is much less likely that itemizing your deductions will be beneficial. However, regardless of whether your return is simple or complex, you have options when deciding which tax filing method is best for you. You can:

• Prepare them yourself. If you are confident that you have a handle on your taxes, you can carefully follow the instruction guide to enter all of the information and complete your taxes yourself, submitting them via mail or online.

• Use the IRS’s Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE). VITA offer free tax preparation for qualified people who make $60,000 or less, persons with disabilities, or limited English-speaking taxpayers, whereas TCE assists seniors, particularly with questions about pensions and retirement-related issues. These programs allow you to meet with a volunteer tax professional in your area that you can find using the IRS locator tool.

• Use IRS Free File for simple returns and adjusted gross income of $73,000 or less. This service utilizes popular tax software that will walk you through your return step by step. There are also free versions of commercial tax software for simple returns.

• Purchase tax preparation software. If you aren’t comfortable doing it all on your own but you want to have some control, tax software from companies like TurboTax or H&R Block will prompt you to provide the right information and ask you all the right questions to ensure you don’t leave anything out. It will also insert the information into all the right forms automatically. Some levels of the software even offer personal tax assistants and a guarantee that your return is correct, so in the event that you get audited, they incur the fees, not you.
   
• Hire a tax professional. If you want to hand all of your tax info over to someone and leave it to them to magically turn it into a tax return, then hiring a tax firm or individual may be right for you. There are national tax prep companies as well as individual preparers and local tax firms.

Tip #7 – Don’t forget to file your state return

Just when you thought you were finished with all the forms, you remember you also have to submit your state tax return. Ugh, right? The good news is that this is usually much simpler to do once your federal return is complete, since much of the information is transferrable. However, there is usually additional information to include, so be sure to use the correct state forms and follow the instructions. If using tax software, you will be prompted for the information you need.

Tip #8 – Speed up your refund

Submitting your taxes electronically and providing bank information for direct deposit of any refund will significantly speed up the whole tax process. However, you can only file electronically with the IRS if you use the VITA or TCE programs above, if your return is completed through commercial tax software with links to the IRS, or if prepared by a tax professional who can transmit digital returns. You can provide information for direct deposit, though, even if you must mail your taxes.

Tip #9 – Things to Avoid

Some of these may go without saying, but, hey, we want to make sure you’re covered! So, DON’T:

• Wait until the day before the deadline to start working on your taxes.
• Withhold any income information (even if paid in cash) or willfully hide relevant information. Penalties, audits and legal action are no joke!
• Assume you can use the 1040 form or don’t need to file. Review the requirements for filing and Tip #4 to ensure you file using the appropriate form.
• Fail to review your work! From the spelling of names, to Social Security numbers, to math computations, do a once-over to make sure you’re submitting an accurate return.
• Forget to sign your return.
• Miss the deadline – April 18.
• Mail to the wrong address. The instructions should identify where to mail your return for your region.
• Throw away your documentation. Keeping all of your records for 5-7 years is super important in the event you get audited. Referencing those forms and information may also make it easier to file next year.

Want to be a Financial Pro?

Would you like to be a tax professional yourself or gain the knowledge to start a career in finance? Ottawa University has fully online undergraduate and graduate programs in business, accounting, and finance that can give you the credentials for a successful career and make you the go-to person for financial assistance. Contact us today to enroll!