5 things to know as filing season opens

Damircudic | E+ | Getty Images

This is an excerpt from the Personal Finance team’s weekly Twitter Space, “This week, your wallet.” Check out the latest episode here, and tune in every Friday at 11 a.m. ET.

Tax season kicked off Jan. 23. The IRS expects taxpayers to file more than 168 million returns, most before the April 18 deadline.

Here are some key things to know before filing, according to CNBC’s Sharon Epperson, senior personal finance correspondent, and Kate Dore, a personal finance reporter.

1. Filing — and tax help — may be free

Certain taxpayers can leverage free (and often little-used) resources when filing a return.

The IRS Free File program offers free, guided tax preparation online. The program, delivered via a public-private partnership, is available to taxpayers with an annual adjusted gross income of $73,000 or less.

Free File is available to 70% of taxpayers, but few use it — and they may inadvertently pay to file a return.

The IRS also offers Fillable Forms, which are electronic federal tax forms you can fill out and file online for free. It’s essentially a pencil-and-paper option for do-it-yourselfers.

More from Smart Tax Planning:

Here’s a look at more tax-planning news.

You may also be eligible for free tax help at a local Volunteer Income Tax Assistance Center, generally available to people who make $60,000 or less, people with disabilities or those with limited English. Those 60 years and older can also get help via Tax Counseling for the Elderly.

You can locate a nearby VITA or TCE site on the IRS website.

2. When to file a tax return

In most cases, you should file as soon as possible — to get a faster refund and reduce the odds of a fraudster claiming a refund in your name via identity theft.

However, you need all the relevant tax forms to file, and they may not all be available yet. You can use last year’s tax return to get a sense of what forms you may need. They may be mailed to you or available online. (Aside from tax forms, be sure to have receipts handy for relevant tax deductions and credits.)

If you owe a tax bill — and are concerned you don’t have the money to pay right now — you can delay submitting a return, generally up to April 18. At that point, file a return and pay at least a portion of your bill to reduce penalties.

3. Timing and amount of tax refunds

In general, you should get a refund within 21 days.

To avoid delays, file an electronic, error-free tax return with direct deposit for payments. Don’t send a paper return or ask for a refund check.

Sharon Epperson's money moves to make heading into 2023

Double check your return for key details and basic mistakes such as typos in your name, address, date of birth, banking details and Social Security number. Mistakes can delay refunds.

The IRS has warned that tax refunds may be smaller this year. Pandemic-era tax relief — like enhancements to the child tax credit, child and dependent care credit, and earned income tax credit — are no longer available.

4. What to do with a tax refund

It may be wise to save — and not spend — your refund this year. Having a bigger financial cushion is important in an environment of economic uncertainty.

Taxpayers can earn roughly 3% to 4% on that cash via an online bank offering a high-yield savings account. They may also wish to contribute to a pre-tax or Roth individual retirement account.

5. Smoother customer service

Those with tax questions may experience smoother IRS customer service this year relative to the recent past.

The Inflation Reduction Act boosted funding for the agency, which has begun rolling out changes like hiring 5,000 new customer service reps and new technology allowing people to respond to some notices online.

Last year, just 13% of people who called in reached a representative. The IRS hopes to bring phone wait time down to 15 minutes.

Source link

Products You May Like

Leave a Reply

Your email address will not be published. Required fields are marked *

Get The Best Financial Tips
Straight to your inbox

Subscribe to our mailing list and get interesting stuff and updates to your email inbox.

Slot Anti Rungkad