It’s kind of what you do in January — new year, new goals, new me … right?
Well, as someone who’s made resolutions and failed to keep them over many years, I’m all about focusing on what I know is doable.
As your Western Illinois tax pro, I’m of course going to talk about all of this in terms of your tax standing. And I’m not merely talking about filing your 2022 taxes over the next couple months.
But, hey – while we’re on the subject, let’s focus on it for just a second.
By the end of the month, you should have your 1099s and W-2s (K-1s come out by March), and you most likely have other documents that you’ve held onto for deduction purposes as well. What I recommend…
1. Get them organized.
Sure … we can handle the “receipts in a shoebox” thing – but it just means that things take way longer, and you might not always be happy with that result. Getting things organized on your end will ensure my team and I can get everything processed and submitted to the IRS as soon as possible. (And that will probably ensure a better, quicker result on their end.)
2. Schedule an appointment with your favorite Western Illinois tax pro (wink, wink) ASAP:
Alright, but now that we’re in a new year, it’s time to right the wrongs of 2022 … and as the hoary old cliche goes, the early bird gets the worm.
In this case, the person who starts implementing tax strategies at the beginning of the year gets a better tax standing for next year. Okay, so that analogy, not strong… but you get the drift.
Let’s take a look at what you can do now to get ahead in 2023…
2023 Tax Strategies Western Illinois Taxpayers Should Make Now
“Start with the end in mind.” – Stephen R. Covey
Welcome to the new year. Everyone likes to talk about having a clean slate, a fresh start, new opportunities. Because I’m a tax pro, I say… let’s talk about taxes.
Actually, let’s talk about preparing for taxes aka tax strategies. It’s more fun than taxes themselves (what isn’t?), and it can save you hassles down the road if you start right now at the beginning of the new year.
Maybe it seems odd to start the year off by talking about planning for next year’s tax filing. But, actually starting now means things are much easier the rest of 2023.
So… what’s the first step in implementing tax strategies? Let’s take a look.
Get ready for some paper
Everybody’s heard about the shoebox of records (we’ve seen a few, that’s for sure) but you don’t need a master’s in taxation to recognize that as a poor way to get ready to file taxes.
To implement tax strategies, you need to have an idea of what paperwork is involved in reporting to the IRS. This is nowhere near a complete list of the forms you might get, but documents you should get ready to receive:
– W-2 forms for your wages
– IRS Form 1099-G (for unemployment compensation, among other things)
– 1099-MISC for miscellaneous income, including rent
– K-1/1065 for partnership and trust income (these are sometimes late in recent years, but not always)
– 1099-R for pensions and annuities, retirement accounts and some other sources
– 1099-INT for interest income
– 1099-DIV for dividends
– 1098 for mortgage interest
– SSA-1099/1042S regarding Social Security benefits.
(You might have heard you were also going to get income tax forms if you made just 600 bucks through online selling or a gig job. Thankfully, the IRS put that cute idea on hold for at least another year.)
Go back through 2022 and make a list of all the employers, brokerage houses, and such that may be sending you tax documents. Double-check that employers and institutions that’ll be sending you a tax form have your right address and other details. You’d be surprised what people can mess up … and if they send a tax record to the IRS and don’t file your taxes with it, you’ll have to amend your return later – why take the chance?
Most individual taxpayers have everything available by the end of January (most – this can vary depending on your asset and other factors, so stay in touch with us if you think something’s late or missing). By the way, we can’t even start filing federal taxes until the IRS announces their start date.
One challenge these days, of course, is that records come many ways: some by mail, others with an email, or other electronic notice telling you they’re available online.
If you need an organizer and we haven’t sent you one or given you access to one online, let us know. Otherwise, get a folder (label it and don’t misplace it) and slip all tax docs in there that come in the mail, as well as printed ones from online.
New details for 2023
Federal tax information changes every year (they almost seem to delight in changing it …). For starters, Tax Day in 2023 is Tuesday, April 18 since the normal Tax Day, the 15th, is a Saturday and Monday, April 17 is Emancipation Day, a holiday in the District of Columbia.
Another of the tax strategies to implement is figuring out how much you’ll owe. Scratchpad math will give you an inkling if you’ll owe taxes for 2022. If you paid taxes quarterly in 2022, by the way, you want to wind up owing less than a grand in tax after subtracting your withholdings and credits or pay at least 90% of your tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. If you think you’ll owe money using that formula, try to pay it with your last quarterly filing for 2022, which is due Jan. 17.
This is also a great moment to start budgeting and pre-setting deadlines to pay your quarterly taxes through 2023.
Looking ahead, federal tax brackets were adjusted due to inflation quite a bit for the new year. By looking at these new numbers, you can make another smart move ASAP and make sure you’re having the right amount withheld from your paycheck. Again, we can help, and the good folks at the IRS also have this withholding estimator.
Budgeting for other accounts
No early-year implementation of tax strategies is complete without considering what you’ll put into your nest egg and other accounts (such as for healthcare spending) that give you tax breaks.
In 2023, you’ll be able to kick in more than three grand to a health flexible spending arrangement, for instance. You can put a couple grand more into your workplace retirement plan, up to 22,500 bucks (if you’re older than 50, your catch-up contribution went up, too). The limit on annual contributions to your IRA went up 500 bucks from 2022 to 6,500 dollars.
Again, set a budget and fix your dates to contribute – and you’ll be sitting pretty by early 2024.
Tax planning and putting tax strategies into play never really stops despite what the calendar says. You can make plans for your tax situation looking ahead, and we’re always here to advise you.
Here for you,