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Compare the best tax software of 2023
The 2023 tax season is underway, and the IRS expects more than 168 million filers will submit their 2022 tax returns before the April 18 deadline.
If you anticipate that your taxes will be more complicated this time around—maybe because you collected unemployment benefits last year, started working a second job or welcomed a “new addition” to the family—it’s critical to prepare in advance to file your taxes and make sure you avoid late penalties.
Here are eight tips to help you have a smooth 2023 tax season.
1. Organize Your Tax Documents and Financial Records
Take time to organize your tax paperwork and financial records, which can make the actual filing process faster and easier.
Use last year’s tax return as a starting point. Digging out your previous return helps ensure you’ll have the required documentation to prepare your tax return this year.
You can retrieve a copy of your prior year tax return by requesting a copy through the IRS online portal or logging into the tax software provider you used last year. If you worked with a CPA or other tax professional, chances are you were given a copy of your return when you filed.
Though everyone’s tax situation is different, here’s a list of common tax forms and records you’ll want to assemble prior to filing your tax return.
2. Update Your Name and Address, If Needed
If you had a name change or moved during the year, you’ll need to let the IRS know.
If your name changed, you would first need to notify the Social Security Administration as soon as possible. Failing to do so may cause the processing of your tax return to be delayed. Next, you’ll need to apply for a new Social Security card by completing Form SS-5, “Application for a Social Security Card.” The new card will reflect your new name.
If you relocated, the IRS offers several ways to notify the agency of an address change.
3. Create an IRS Online Tax Account
Setting up an online tax account with the IRS is a great way to obtain your tax documents without having to contact the agency by phone or mail. This feature allows you to log into an account and check payment balances, set up payment arrangements and view prior-year tax returns and reported tax forms.
The online portal allows you to manage your communication preferences. For example, you can choose to have notices emailed to you from the IRS. It also allows you to authorize a tax professional to work on your behalf.
The portal cannot be used to electronically file your tax return.
4. Expect a Smaller Tax Refunds in the 2023 Tax Season
The IRS warns taxpayers that they may receive smaller tax refunds this year.
A big reason is the elimination of boosted child tax credit payments and the end of other pandemic relief, including stimulus payments.
As part of President Joe Biden’s American Rescue Plan, the child credit increased in 2021 from as much as $2,000 per qualifying dependent to $3,600. However, the maximum child tax credit fell back to $2,000 for 2022 and the tax returns due this spring.
So, the beefed-up child tax credit is gone, and taxpayers can no longer claim the recovery rebate credit to request missing stimulus payments. These changes, coupled with other tax law adjustments, may add up to smaller tax refunds.
But taxpayers who have yet to claim the expired credits for prior tax years should file those returns as soon as possible. The IRS gives you only three years to seek tax refunds for past years.
5. Pay Taxes Due by April 18
If you expect to owe taxes when you file your tax return, you’ll want to pay as much as possible by the due date, which is April 18 this year.
If you are unable to pay the full amount you may owe, pay as much as you can. Since the IRS failure-to-pay penalty is generally charged at 0.5% of the unpaid tax per month, paying what you can reduces the amount you’ll be penalized.
6. Choose Between a CPA or DIY
One important tax season decision is whether to hire a certified public accountant or do your taxes yourself. As a CPA and former IRS agent, I recommend using online tax software to file your own taxes in some situations. But there are certain tax situations when it’s best to establish a relationship with a tax professional.
If you are a freelancer, operate a small business or are an investor, it may be a good idea to seek the assistance of a CPA. Forging a relationship with a CPA can help you navigate possible tax deductions, create tax strategies for the future, and face the IRS if it ever comes knocking on your door to audit your taxes.
On the other hand, if you have a very simple tax filing, with a basic wage and income statement (W-2) and a few deductions, you may want to consider going the DIY route. This is also generally a much cheaper option.
Keep in mind that if you expect you’ll need the help of a CPA or other tax pro, now is the time to establish that relationship. CPAs often stop taking new clients for the season as Tax Day draws near.
7. Find Free Ways to File
Depending on your income and the complexity of your tax filing situation, you may qualify for the IRS Free File Program.
Taxpayers who have adjusted gross income—total income minus certain deductions—of less than $73,000 may qualify for the IRS Free File Program, which is a partnership between the tax agency and online tax software providers.
While the program has been in existence since 2001, you may not have heard of it. Since online tax software providers donate their free services, they tend not to advertise them. And while the IRS estimates that 70% of all taxpayers qualify for Free File, only a small percentage of taxpayers have used it.
You may also be eligible for the IRS Volunteer Income Tax Assistance Program (VITA), which program provides free tax-preparation assistance to qualified taxpayers.
Taxpayers who make $60,000 or less, have a disability or speak limited English qualify for the program. During Covid-19, some VITA sites closed. To find an open VITA office near your home, visit the IRS website for more information.
8. File for an Extension
If you’re not able to meet the tax filing deadline—April 18, 2023—you can elect to file an extension. You can request an extension by submitting Form 4868, “Extension to File,” to the IRS on or before the due date. A valid tax extension changes your tax return due date to October 16, 2023.
There are many options to request an extension; you can file one for free using the IRS Free File program or by mailing Form 4868 to the IRS. But note that while an extension gives you six additional months to submit your tax return, it doesn’t extend the time to pay your taxes. You’ll still need to pay by the due date.