Getting your money right: tips for getting through tax season this year

Welcome to CNBC Select’s advice column, Getting Your Money Right, where financial advisor Kristin O’Keeffe Merrick will be answering your pressing money questions. You can read her last installment here on how to invest in a volatile market. Have a question you want to ask? Send us a note at [email protected].

Dear Kristin,

Every year when tax season comes around, I find that I am overwhelmed by what I need to do in order to prepare. Could you outline what I should do to get ready to file and provide me with some tips that I need to know?

Signed,

Taxed in Texas

Dear Taxed,

You are not alone, my friend. I have yet to meet someone who likes tax season, but I can definitely help make it less painful for you. 

First, you need to decide if you should hire an expert to prepare your taxes. Many people prefer to have a tax professional make sure they are doing everything correctly. However, tax-filing technology has come a long way and can be extremely helpful. Some tax platforms will also offer human assistance if you need it. If your filing is simple (e.g. you’re an employee who receives a W2 and doesn’t itemize your deductions), consider a tax-filing platform such as TurboTax or H&R Block and save yourself the cost of paying an accountant.

That said, you should consider using a professional if you itemize your deductions. For example, I itemize my taxes because I own a business, have a mortgage, and have multiple streams of income. This is a complicated filing and I definitely need the help of an accountant. If you need an accountant, ask family, friends or colleagues about who they use.

Second, please file electronically. This is especially important if you are going to receive a refund. Filing electronically is more efficient and helps you receive your money from the IRS much faster.

Next, pick one day to download all of the forms you need to file. By now, you should have received your W2s and 1099s for the income you made this year. You’ll also need to download other statements such as 1099s from your investment accounts. This includes any IRAs, 401ks, or regular brokerage accounts you may have. These statements can all be found on your investment portal on your investment platform. In some cases, they will arrive by mail.

If you have a mortgage, you should obtain your mortgage interest statement. Also, if you pay property taxes, your municipality will issue you a statement. If you have any private investments, you should receive a document called a K1. Note that many times, K1s can take longer to prepare and send out. If you think your K1 will be delayed, make sure to file a tax extension.

Last (but not least!), you should have a record of all of your charitable contributions, 529 contributions and IRA contributions that you made in 2022. In some cases, they could provide you with tax deductions.

There are a few additional tips I want to highlight before I wrap up.

• If you plan to file an extension and expect to owe money, you still need to make an estimated payment before April 18. Getting an extension doesn’t grant you a grace period on the money you owe. Also, file as soon as possible and don’t wait until the Oct.15 deadline.
• It’s essential for business owners to hire an accountant. A good accountant can help you understand your deductions, ensure you have the correct corporate entity, and can help guide you on the correct retirement plan for you and your business. An accountant should be a trusted advisor and someone you can turn to throughout the year for advice.  

I hope this was helpful to you. I wish you an easy, stress-free tax season!

All the best,

Kristin

Kristin O’Keeffe Merrick is a Financial Advisor and money expert at her family-run firm, O’Keeffe Financial Partners, located in Fairfield, NJ. 

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