Count Your Children: A Tax To-Do List for 2023
A new year brings New Year’s Resolutions. With inflation still taking a toll and markets in turmoil, making smart tax moves–and avoiding dumb ones–brings real benefits in uncertain times. So here’s a clutch of tax resolutions for this year’s filing season and beyond. And here’s hoping that 2023 brings you health and wealth–and better odds of getting the IRS on the phone.
I WILL e-file my tax return, if possible.
Some people need to file paper tax returns because they have an unusual form or a prior identity theft, but most can e-file.
Filers who submit paper returns risk an array of problems, such as key-punch errors on name or taxpayer ID numbers, or even a form getting dropped on the floor. When pandemic tasks like stimulus payments diverted IRS resources from return processing, a large chunk of the backlog was paper returns.
I WILL check my W-2 wage forms and Form 1099 income reports when I get them.
If there are mistakes, get a corrected form before filing the return. An IRS spokesman notes that agency rules require companies sending out forms to include a phone number the recipients can call if they have questions.
I WON’T blow off the IRS’s April deadline.
This year’s tax due date is April 18. Taxpayers who miss the deadline typically get clobbered with failure-to-file and failure-to-pay penalties that quickly mount to 5% or more of the tax due per month, plus interest. All taxpayers can have a six-month extension to finish their paperwork simply by filing IRS Form 4868. The agency also has options for filers who can’t afford to pay their taxes, which are due in April.
I WILL minimize my tax refunds.
The average refund has been about $3,000 in recent years, in part because many filers use refunds as forced savings. But this means the taxpayer is making an interest-free loan to Uncle Sam, and that costs more now that interest rates have risen. If there are IRS processing delays–as during the pandemic–the filer may have to wait a long time for a sorely needed sum.
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I WON’T make my tax preparer want to strangle me.
The tax code is frustrating enough, so don’t cause your preparer unnecessary trouble. “Trouble” includes answering some questions the preparer asks but not others, or dashing in on April 10 with a shoebox full of unsorted and incomplete records. Also don’t text long documents to the preparer with just one page in each text.
Do count your children: Mr. Herron says that last year he had to file two amended returns for a married couple with a blended family who kept revising which children qualified as dependents. “We started with three and ended with one,” he says. “It drove me nuts.”
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