Steps you can take now to make tax filing easier in 2023

The Internal Revenue Service today encouraged taxpayers to take simple steps before the end of the year to make filing their 2022 federal tax return easier. With a little advance preparation, a preview of tax changes and convenient online tools, taxpayers can approach the upcoming tax season with confidence.

View your account online

Use online account to securely access the latest information available about your federal tax account and see information from your most recently filed tax return.

You can:

• View your tax owed, payments, and payment plans
• Make payments and apply for payment plans
• Access your tax records
• Sign Power of Attorney authorizations electronically from your tax professional
• Manage your communication preferences from the IRS

Gather and organize your tax record

Organized tax records make preparing a complete and accurate tax return easier. It helps you avoid errors that lead to processing delays that slow your refund and may also help you find overlooked deductions or credits.

Wait to file until you have your tax records including:

• Forms W-2 from your employer(s)
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, pension, annuity or retirement plan distributions
• Form 1099-K, 1099-MISC, W-2 or other income statement if you worked in the gig economy
• Form 1099-INT if you were paid interest
• Other income documents and records of digital asset transactions
• Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance payments or claims Premium Tax Credits for 2022 Marketplace coverage
• IRS or other agency letters
• CP01A Notice with your new Identity Protection PIN

Notify the IRS if your address changes and notify the Social Security Administration of a legal name change.

Remember, most income is taxable. This includes:

• unemployment income,
• interest received,
• income from the gig economy, and
• digital assets.

Check your Individual Tax Identification Number (ITIN)

An ITIN only needs to be renewed if it has expired and is needed on a U.S. federal tax return. If you do not renew an expiring or expired ITIN, the IRS can still accept your tax return, but it may delay processing it or delay tax credits owed to you, such as the Child Tax Credit and the American Opportunity Tax Credit, which can impact when you get your tax refund.

If your ITIN wasn't included on a U.S. federal tax return at least once for tax years 2019, 2020, and 2021, your ITIN will expire on December 31, 2022.

As a reminder, ITINs with middle digits 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, or 88 have expired. In addition, ITINs with middle digits 90, 91, 92, 94, 95, 96, 97, 98, or 99, IF assigned before 2013, have expired. If you previously submitted a renewal application and it was approved, you do not need to renew again.

The IRS processes requests in the order they were received. Currently, IRS is working ITIN applications received in July 2022. Your patience is appreciated. You will be notified once your ITIN is assigned or if additional information is needed. 

Make sure you’ve withheld enough tax

Consider adjusting your withholding if you owed taxes or received a large refund when you filed. Changing your withholding can help you avoid a tax bill or let you keep more money each payday. Credit amounts may change each year, so visit IRS.gov and use the Interactive Tax Assistant to identify whether you qualify for any tax credits that may call for a withholding adjustment. Life changes – getting married or divorced, welcoming a child, or taking on a second job - may also mean changing withholding.

Use the Tax Withholding Estimator to help you determine the right amount of tax to have withheld from your paycheck. This tool on IRS.gov will help determine if you need to adjust your withholding and submit a new Form W-4 to your employer.

Consider estimated tax payments. If you receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income you should make quarterly estimated tax payments, with the last payment for 2022 due on January 17, 2023.

Log in to your online account to make a payment online or go to IRS.gov/payments.

The fastest way for you to get your tax refund is by filing electronically and choosing direct deposit. Direct deposit gives you access to your refund faster than a paper check. Get your routing and account number by signing into your online banking account or contacting your bank.

Get banked to speed tax refunds with direct deposit

Don't have a bank account? Learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool. If you are a Veteran, see the Veterans Benefits Banking Program (VBBP) for access to financial services at participating banks.

Prepaid debit cards or mobile apps may allow direct deposit of tax refunds. They must have routing and account numbers associated with them that can be entered on your tax return. Check with the mobile app provider or financial institution to confirm which numbers to use. 

Direct deposit also avoids the possibility that a refund check could be lost or stolen or returned to the IRS as undeliverable.  

What’s new and what to consider when you file in 2023

More taxpayers will be receiving Form 1099-K

Change is effective Jan. 1, 2022.  All third-party payment platforms are required to issue Forms 1099-K when payments to merchants for goods and services exceed $600.

What is reported on a 1099-K? If you accepted $600 or more in 2022:

• by payment cards for good and services, you will receive one Form 1099-K for the total amount of the payments from each payment card.
• from a third-party payment app, you will receive one Form 1099-K from that organization for the total amount.

When will I get the 1099-K and what should I do with it? 2022 Forms 1099-K must be furnished to the payee by January 31, 2023. Use this information return with your other tax records to determine your correct tax. 

What is not reported on a 1099-K? Money received as a gift or reimbursement of a share of a meal or rent should not be reported on a 1099-K. Payments should indicate whether they are personal to family and friends or a business transaction for goods and services. 

What if the information is wrong? If the information is incorrect on the 1099-K, contact the payer immediately, whose name appears in the upper left corner on the form. Keep a copy of all correspondence with the payer with your records. If you cannot get the form corrected, you may attach an explanation of the error to your tax return and report your income correctly.

The IRS cannot correct inaccurate Forms 1099-K.

2022 changes that may affect your tax refund

Changes in the number of dependents, employment or self-employment income and divorce, among other factors, may affect your tax-filing status and refund for 2023.

No additional stimulus payments.  Unlike 2020 and 2021, there were no new stimulus payments for 2022 so taxpayers should not expect to get an additional payment in their 2023 tax refund.

Some tax credits return to 2019 levels. Several tax credits, including the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC) and the Dependent Care Credit will revert to pre-COVID levels. This means that taxpayers will likely receive a significantly smaller refund compared with the previous tax year. For a comparison, those who got $3,600 per dependent in 2021 for the CTC will get $2,000 for the 2022 tax year. Similarly, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022. And the Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021. Visit Credits and Deductions for more details.

No above-the-line charitable deductions. During COVID, taxpayers were able to take up to a $600 charitable donation tax deduction on their tax returns. However, in 2022, this deduction will return to pre-COVID rules, which will not allow those who take a standard deduction to make an above-the-line deduction for charitable donations.

More people may be eligible for the Premium Tax Credit.
For tax year 2022, taxpayers may qualify for temporarily expanded eligibility for the premium tax credit. Remember that simply meeting the income requirements does not mean you're eligible for the premium tax credit. You must also meet the other eligibility criteria.

The Inflation Reduction Act of 2022 changes the eligibility rules to claim a tax credit for clean vehicles. More details about clean vehicles will be available in coming months.

Avoid refund delays and understand refund timing

Many different factors can affect the timing of your refund after we receive your return. Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills.

Identity Theft and refund fraud. Some returns may require additional review and may take longer. The IRS, along with its partners in the tax industry, continue to strengthen security reviews to help protect against identity theft and refund fraud.

IRS cannot issue EITC and ACTC refunds before mid-February. Refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) can't be issued before mid-February. The law requires the IRS to hold the entire refund − even the portion not associated with EITC or ACTC.

Returns requiring manual review. Some returns, filed electronically or on paper, may need manual review delaying the processing if our systems detect a possible error, the return is missing information, or there is suspected identity theft or fraud. Some of these situations require us to correspond with taxpayers, but some do not. This work does require special handling by an IRS employee so, in these instances, it may take the IRS more than the normal 21 days to issue any related refund. In those cases where IRS is able to correct the return without corresponding, the IRS will send an explanation to the taxpayer.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at +305-274-5811.

Source: IRS