How to start preparation
The 2023 Tax Season is now live, so we decided to compile some tips and ideas for getting through tax season without issue.
Straight from the IRS, here are some ways to avoid making a mistake on your taxes that can cost you later.
Here are some of the mistakes to avoid:
- Filing too early. While taxpayers should not file late, they also should not file prematurely. They should wait to file until they’re certain they’ve received all their tax reporting documents, or they risk making a mistake that may lead to a processing delay.
- Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.
- Misspelled names. The names of all taxpayers and dependents listed on the return should match the names on their Social Security cards.
- Inaccurate information. Taxpayers should carefully enter any wages, dividends, bank interest and other income they received to make sure they report the correct amounts. This includes any information taxpayers need to calculate credits and deductions.
- Incorrect filing status. Some taxpayers choose the wrong filing status.
- Math mistakes. Math errors are some of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software will check it automatically.
- Figuring credits or deductions. Taxpayers can make mistakes figuring out things like their earned income tax credit, child and dependent care credit and child tax credit. Tax software will calculate these credits and deductions and include any required forms and schedules.
- Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for them to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.
- Unsigned forms. An unsigned tax return isn’t valid. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney.
- Disreputable tax preparers. Taxpayers should remember they, not the tax preparer, are responsible for the information on their tax return.
Other ways to work on your taxes before filing:
Organizing your tax documents, whether it is keeping track of taxes already paid or itemized deductions, having your documents in order is a must. By collating all your important tax documents in one place you can either have all the information you need to file your own return or provide your tax professional with everything they need to file your return in a quick efficient manner. This can also help if you need to make a last-minute estimated tax payment.
Now that you have put your documents in order you have several options that can be done with your information.
You can contribute to charity for a deduction, contribute to a retirement or tax-advantaged account, if there are a lot of deductible expenses you can look to itemize them instead of claiming a standard deduction (this includes the aforementioned charitable contributions), as well you can look into changing a previous IRA to a Roth IRA, in which you can pay taxes now on contributions without future tax penalties.
You can also investigate tax status changes and deductions including marital status, education breaks, change in dependents, home office tax deductions, and other tax credit opportunities.
If you dealt with losses this year, something you might want to discuss with a Certified Financial Professional is Tax Loss Harvesting. This allows for the sale of underperforming assets and reinvestment in similar but more promising assets, offsetting capital gains and some realized income. This should always be done with consultation or by a professional.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
This information is not intended to substitute for individualized tax advice. We suggest that you discuss your specific tax issue with a qualified tax advisor.
