Filing taxes can be a complicated process, but the Internal Revenue Service (IRS) has released a tax time guide to help taxpayers navigate through it. Optima Tax Relief reviews some of the things to consider when filing a 2022 tax return.
Gather your documents
Before you begin filing your taxes, it’s important to gather all the relevant tax documents. This includes W-2, 1099 forms, and any other documents a taxpayer may have received from their employer, bank, or investments. Taxpayers should keep all their documents organized, so they don’t miss anything. If any information is missing or incorrect on these documents, they should contact the payer as soon as possible to receive a correction before the tax deadline.
Determine your filing status
A filing status determines the tax rate, standard deduction, and eligibility for certain tax credits. A taxpayer can choose from five different filing statuses: single, married filing jointly, married filing separately, head of household, and qualifying widow(er). They should choose the status that best fits their situation and the one that will result in the best financial outcome. For example, married couples filing jointly receive more tax breaks than other filing statuses.
Decide on deductions
Tax deductions are expenses that can be subtracted from taxable income, reducing the amount of tax owed. Taxpayers can either take the standard deduction or itemize their deductions. The standard deduction is a fixed amount that varies depending on filing status. Itemizing deductions requires more work, but it may be worth it if a taxpayer has significant expenses that qualify. The 2022 standard deduction is $12,950 for single filers and married couples filing separately, $19,400 for heads of household, and $25,900 for joint filers. If itemized deductions amount to more than the standard deduction, the taxpayer should itemize.
Claim tax credits
Tax credits are dollar-for-dollar reductions in your tax bill. They can be more valuable than deductions because they directly reduce the amount of taxes owed. There are many tax credits available, including the Earned Income Tax Credit, Child Tax Credit, and American Opportunity Tax Credit. Taxpayers should make sure to review the eligibility criteria for each credit and the details for each. Some tax credits return to 2019 levels, meaning a decrease in the credit amount.
Review the 1099-K reporting rules
2023 is a transition year for 1099-K reporting as it is the final year for current rules. Currently, if a taxpayer earns an excess of $20,000 via 200+ transactions in a single year, they should receive a 1099-K form from the third-party payment network. Beginning in 2024, the reporting rules are drastically changing. Form 1099-K will be sent to anyone who earns at least $600 in a year.
Review the tax filing deadline
The tax filing deadline for 2022 is April 18, 2023. However, the tax deadline has been extended to October 16, 2023 for victims of winter storms.