As April 15 approaches, individuals across the country are preparing to file their 2023 income tax returns (Taxpayers living in Maine or Massachusetts have until April 17, 2024, due to the Patriot’s Day and Emancipation Day holidays). If a taxpayer resides in a federally declared disaster area, they also may have additional time to file. Whether you’re a seasoned filer or facing this task for the first time, it’s essential to stay informed and organized to ensure a smooth process. Here are some focal points to keep in mind as you prepare to tackle your taxes:
- Meet Filing Deadlines: Mark your calendar with the relevant tax filing deadlines to avoid penalties or interest charges for late filing. As noted, for most individuals, the deadline to file federal income tax returns for the 2023 tax year is typically April 15, unless extended by the IRS.
- Familiarize Yourself with Changes: Tax laws and regulations are subject to change each year. Stay updated on any amendments or revisions that may impact your filing status, deductions, credits, or tax brackets for the 2023 tax year.
- Gather all necessary documents and records for accuracy to avoid missing a deduction or credit. This will help you file a complete and accurate tax return. Errors and omissions slow down tax processing, including refund times. Before beginning the process, you should have:
- Bank account and routing numbers.
- Form 1095-A, Health Insurance Marketplace statement.
- Investment income statements and mortgage interest statements
- Social Security numbers for everyone listed on the tax return.
- Tax forms such as W-2s from employers, 1099s for freelance or contract work, 1098s and other income documents or records of digital asset transactions.
- Consider Tax Deductions and Credits: Explore available deductions and credits that can help reduce your taxable income or increase your refund. Common deductions include mortgage interest, charitable contributions, student loan interest, and medical expenses. Additionally, tax credits such as the Earned Income Tax Credit (EITC) and Child Tax Credit can provide significant savings.
- Review Changes in Tax Brackets: Understand the tax brackets applicable to your income level for the 2023 tax year. Tax brackets determine the percentage of your income that you owe in taxes, and knowing where you fall can help you plan accordingly.
- Stay Organized and Accurate: Accurate record-keeping is crucial when filing your taxes. Keep track of receipts, invoices, and other documentation to support your deductions and credits. Double-check your calculations and ensure that all information provided on your tax return is accurate and up to date.
- File Electronically for Convenience: Filing your tax return electronically offers several advantages, including faster processing, confirmation of receipt, and the option for direct deposit of any refund owed to you. Many tax preparation software programs provide step-by-step guidance and help minimize errors.
Note: Seek Professional Assistance if needed: If you’re unsure about any aspect of your tax situation or feel overwhelmed by the process, don’t hesitate to seek assistance from a qualified tax professional. CPAs, tax advisors, accountants, or enrolled agents can provide personalized guidance and ensure compliance with tax laws.
Personal Financial Planning Tip
Plan for the Future, use the tax filing process as an opportunity to evaluate your financial situation and consider strategies for the year ahead. One strategy is contributing to a retirement account, such as 401(k)s, IRAs, and Roth IRAs. This can offer both tax benefits and long-term savings growth. Consider maximizing your contributions to these accounts to lower your taxable income and build your retirement nest egg. Whether it’s adjusting your withholding allowances, setting new financial goals, or maximizing tax-advantaged savings, proactive planning can help minimize future tax liabilities.
By keeping these key points in mind and staying organized throughout the tax preparation process, you can navigate your 2023 individual income tax return with confidence and ease. Remember, timely and accurate filing not only ensures compliance with tax obligations but also maximizes your potential for tax savings and financial well-being.
Tax laws directly impact an individual’s personal financial plan. At Paraklete® Financial we work with CPA’s as part of our client’s collaborative team of advisers. The collaborative team is essential to the personal financial planning process. For more information, please visit us at https://www.parakletefinancial.com
