Council Post: Ten Tax Filings Tips For The 2023 Tax Season

Karla Dennis, EA, MST & CEO of The Award Winning Tax Accounting Firm, Karla Dennis and Associates Inc.—Specializing In Tax Planning.

It is tax time. What should you consider doing so that you can minimize your tax bill?

Get Organized

The first thing is to get organized. Organization is half the battle, but I know a lot of people struggle with how to do it. So I advise my clients to use my 12-by-12 system. You’re going to take 12 days to organize 12 months of the year. So for example, on your first day, you’re gonna organize January. You’re going to go back through all of your bank statements, checking accounts, merchant statements and credit card statements. You’re looking for transactions that can be tax deductible for you or your business.

Gathering Year-End Documents

Make a list of all your financial institutions. Meaning, every place that you do any type of banking or financial transactions—make a list. Next, log in to each one’s online portal, and download your year-end documents—just in case you don’t receive them in the mail. This will help you double-check your deductions and makes it less likely you miss out on reporting any income.

Itemizing Deductions

Consider itemizing your deductions and not just taking the standard deduction. Many times I think that we get complacent and we settle for the standard deductions, and we don’t look for those extra deductions that can push us over and get us a larger write-off. Things like our mileage going to and from the doctor—that’s a tax write-off. Mileage from doing charitable organizations or donating can also be a write-off. So, take the time to see if you can get your itemized deductions to be higher than your standard deduction. Typically, we are spending more money than we realize.

Register On IRS.gov

Fourth, register on irs.gov by creating an online account. This allows you to go to irs.gov, pull up your income information and find out what third parties have reported on you. It can also be used to check your refund and to even check a previous year’s numbers. When you’re getting ready to prepare your taxes this year, you can easily get a transcript of your last year’s tax return if you can’t locate it already.

File Form W-9

Next, go to your child care organization or your child care provider—if you have younger children—and request the EIN number, or their taxpayer identification number. Then, you would file form W-9. This is going to give you a child tax credit. Remember, we want to make sure you can take advantage of that child tax credit because credits are dollar for dollar against tax owed, so you can really drop your tax bill very quickly.

Review Last Year’s Return

Next, consider finding last year’s tax return, print it out and look at it. No one wants to look at a tax return, but it is going to allow you to see exactly what you deducted last year and exactly what was income. This then helps you remember the types of things that should be deducted on your return.

Make A List

Start making a list of questions that you wanna ask your tax preparer. While you’re going through your documentation, looking at your financial institution information, going through prior W-2s and when you’re going through prior tax returns—if things pop into your head that you want to ask, write them down then and there. When you get to that appointment, you want to make sure you are getting all the answers you need. So, start writing down questions that could potentially help remind you of what to ask your tax professional. I’m willing to bet that you could end up with a lower tax liability because that tax professional is able to pull things from you just by you asking them questions.

Let The Professionals Decide

Don’t make any assumptions and automatically think that certain deductions are not tax deductible. Do not do that. I want you to write down everything that you can possibly think of and allow your tax professional to tell you whether or not it’s tax deductible. Many times when I am talking to clients, they’ll say, “Oh, I didn’t bring that because I didn’t think it’s tax deductible.”

Let the tax person be the tax person and bring them everything.

Child Tax Credit

Make sure that if you receive advanced child tax credits, you go back and double-check how much you’re meant to receive. This was an issue during filing season last year. Many taxpayers failed to report on their tax return how much money they received in those advanced child tax credits. As a result of that, you end up getting a negative notice from IRS. You could end up filing your return and reporting a larger refund than you’re going to actually get. So, do not forget to go back through your bank statements and make sure that you’re prepared to report that advanced tax credit on your tax return.

Contributing To An IRA

Lastly, consider contributing to an IRA. This is an investment in you and in your future. When you contribute to an IRA, it is going to allow you to reduce your overall taxable income. And you can contribute to an IRA up until the due date of the return. So, if you are 50 and below, you can contribute up to $6,500. If you’re 50 and above, you can contribute up to $7,500. It’s better that you contribute to yourself versus giving that money to the IRS. And remember, you don’t have to contribute the entire $6,500. Maybe you only contribute $2,000, $3,000 or $1,000.

Summary

This tax season, get yourself organized, list out your financial institutions, make that list of questions, look into filing form W-9, review last year’s tax return, consider itemizing your deductions and think about contributing to an IRA.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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