Maximize Your Tax Filing: 3 Key Factors to Consider During Tax Season
The tax filing season is underway, maximize your tax filing and learn how the Internal Revenue Service (IRS) is implementing improvements with more staffing and technology upgrades as the agency deploys nearly $80 billion in funding. Although processing may be faster this year, experts suggest there are some key things to know before filing your return.
“Every tax season has its own unique challenges,” said Mark Jaeger, Vice President of Tax Operations at TaxAct.
With about six weeks remaining until this year’s federal tax deadline of April 18, here are three critical factors to keep in mind:
1. Tax refunds may be lower this season. Early filings have slowed, and the average refund was 3,079 as of Feb. 24, compared to $3,473 the year before. Jaeger suggests that refunds are going down and more people have a balance due, which may be why early returns have tapered off.
The IRS warned that refunds this year may be “somewhat lower” than last year due to expiring pandemic relief that delivered tax breaks in 2021.
2. Avoid refund delays with a complete, accurate return. To avoid refund delays, filing a complete and accurate return is essential. The IRS typically issues refunds within 21 days for error-free, electronically filed returns with direct deposit for payment. It’s critical to have all your tax forms ready before submitting your return.
Employers and financial institutions send tax forms every year, and if you miss any information, it may trigger a tax notice from the agency with possible penalties and interest.
3. There’s a one-year delay for 1099-K reporting. If you receive Form 1099-K by mistake, the IRS suggests contacting the issuer immediately, while tax professionals recommend including the form’s details on your return to avoid a mismatch at the agency.
Although the threshold for 1099-K reporting was set to change for 2022, dropping to $600 for even a single transaction, the IRS delayed the reporting change until 2023. Regardless, you must include business payments on your tax return even if you don’t receive the form for 2022.
It’s critical to be aware of these three key factors before filing your taxes this year. By considering them, you can maximize your tax filing and avoid potential penalties and interest.
If you have any questions or concerns, don’t hesitate to reach out to a tax professional for guidance. https://calendly.com/jdtaxaccounting
