Tremendous Tax Tips

If you’re working on your taxes, you have plenty of company. More than 168 million individual tax returns are expected to be filed this year. Due to a lucky turn of the calendar, the deadline is Tuesday April 18 in 2023. April 15 is a Saturday, plus there is a D.C. holiday that Monday. Here are some tips to make the process as easy as possible.

• Know what is new this year – Now that the pandemic is largely in the rear view mirror, so are stimulus and tax credits. For example, during COVID-19 the Child and Dependent Care credit that helps working parents pay for childcare topped off at $8,000. This year it goes back to being a maximum of $2,100. The enhanced child tax credit is also gone, so instead of getting $3,600 per child, parents will now get $2,000 per child. Go to IRS.gov for a complete list of what is new this year.
• Collect your forms – Put all the necessary forms in one place so you can easily find them. They are available online if you can’t locate them. You need your W2 from your employer if you work and whatever 1099 forms are issued to you to report things like unemployment compensation, interest and dividends, pension annuity or retirement plan distributions. Also don’t forget to have proof of health insurance because they are a requirement in Massachusetts.
• Be smart about your refund – Direct deposit is faster plus there is no chance of it being lost in the mail. When the money arrives, think before you spend. While it’s tempting to go on a spending spree, you will be better off using it to pay down debt, contribute to your rainy day fund, or put it into a CD.
• Get help if you need it – There are many resources available for tax preparation. Hiring an accountant will cost a few hundred dollars. Many pay a small fee to use programs like Turbo Tax that are easy to follow. The IRS.gov website has a wealth of information you can use and the IRS’  VITA Tax Program  offers free tax preparation for qualified people including those who make less than $60,000 per year, people with disabilities, and people in need of language assistance.
• Adjust for life changes – At least once a year check the amount you have taken out of your paycheck to compensate for anything significant that may have happened over the year, such as a raise that puts you in a higher tax bracket. Other life events that impact your taxes are the birth of a child, a marriage or divorce, and the purchasing of a house.

Don’t wait until the last minute to start working on your taxes. With these tips you will be done in no time. It’s important to note that we are not a licensed tax professional.