It’s that time of year again! No, not Valentine’s Day, it’s tax season 2023. For many Americans, filing tax returns for the income you earned in 2022 will feel like the first “normal” tax year since the pandemic began, now that the resulting delays have largely been resolved. However, it’s still important to brush up on the basics (like filing deadlines) and revisit ways to prepare financially for tax season
Whether you choose to file your taxes on your own or with an accountant, this guide will help you head into this year’s tax season with confidence.
Tax Season 2023: Filing Deadlines
Individual Income Tax
Tax season 2023 began on January 23, when the Internal Revenue Service (IRS) started accepting and processing tax returns. This year, individuals have until April 18 to file their federal income tax returns for the 2022 tax year. April 18 is also the deadline for requesting a filing extension, which if granted, means you’ll have until October 16 to file your taxes.
Pro Tip: Contributing to retirement accounts like an Individual Retirement Account (IRA) or Health Spending Account before you file your taxes can be a smart move to decrease your taxable income. You can make these contributions until April 18.
Of course, you’ll also need to file at the state level. The deadlines for state filing vary depending on where you live. For example, the filing deadline in Virginia is May 1 (with exceptions for members of the military and those living abroad or traveling outside of the country on May 1). Checking your state government’s website is an easy way to find out the filing deadline that applies to you.
Corporate Income Tax
If your business is classified as a C Corporation (a company taxed separately from its owners), your corporate taxes also need to be filed by or on April 18.
Alternatively, if you own a partnership or an S Corporation, your filing deadline is March 15. This deadline is earlier in the year to give you time to receive a Schedule K-1 form for your business. You’ll then use that form when you file your personal tax return to trigger your company’s income to flow through to your personal return.
When To Expect The Refund For Your 2022 Taxes
Now let’s get to the good part: the refund. At the federal level, you can generally expect to receive your tax refund within 21 days of filing your return electronically (paper filings take longer to process).
The timeline is similar at the state level, however, it does depend on your employment circumstances. For example, some taxpayer business owners in Maryland have been waiting a long time for their tax refunds if their K-1 forms declared tax withholdings (in other words, if the business owner deducted money from their distributions on each withdrawal).
As the saying goes, “The early bird gets the worm!” This is true when it comes to getting the refund in a timely manner. Filing taxes early in 2023 if possible is best, because if you wait until April 18 to file, you’ll be in the queue with millions of other Americans.
How To Prepare For Filing
it’s wise to begin gathering all the documents you’ll need to complete your tax return (or provide to your accountant) as soon as they start arriving in the mail. Collecting and organizing these documents three to four weeks before the April 18 deadline means you won’t need to scramble at the last minute to find them.
Although everyone’s tax return looks different depending on your personal situation, the key documents you’ll need include the following:
- Your W-2 for salary earned in 2022
- 1099s for interest and dividends earned
- 1099-Bs which report the sales of stocks
- 1099-Misc. which reports income earned from self-employment or other miscellaneous sources
- Medical expenses (you’ll only need this documentation if you get audited, but it doesn’t hurt to gather it now)
- Mortgage interest deductions
- Charitable contributions
- Virtual currency gain/loss report from your crypto provider along with any other income derived from cryptocurrency (there is a question on the tax return as of 2022 that requires you to disclose if you bought, sold, or currently own virtual currency)
In addition, if you own an LLC, you may need to provide a 1099 to any contractors you hired in 2022 to complete work for you, such as a photographer or graphic designer. You would then need to have filed these forms by January 31st.
How much money should you save for your 2022 taxes?
Aside from gathering tax documentation in advance to file your return, an important part of preparing for tax season 2023 is ensuring you have enough money saved to pay any taxes you might owe Uncle Sam. There’s no hard and fast rule for how much money you should put away to cover this, but let’s walk through two common scenarios:
- Employees and retirees can simply choose to withhold funds from their paychecks or pensions to cover their tax liability. For example, if you pulled $100,000 from your IRA in 2022, you could withhold $20,000 to the federal government and $10,000 to your state government at the time of withdrawal. Recipients of Social Security benefits can also elect to withhold money for tax purposes.In any of these situations, you may not have to set funds aside to pay your taxes, because they’ll have already been withheld. However, keep in mind that this does not apply to income from stocks, rental properties, or a business.
- In contrast, individuals who are self-employed or living off investments must pay four quarterly tax payments to the IRS throughout the year. The key to making sure you’ve saved appropriately for this is to follow the safe harbor rule, which applies if you pay enough money back to the IRS to cover 90% of your current year’s tax liability or 110% of the prior year’s liability. Multiplying your estimated tax bill by 0.9 can help you estimate this number.
How much money might you get back?
The best case scenario is that the government will owe you money after you file your tax return. The amount you’ll receive will depend on your specific circumstances. For example, if your company withheld too much money on your paychecks throughout the year, you’ll get more back than you would if they withheld just the right amount to cover your taxes.
In addition, it’s worth noting that the IRS is warning taxpayers they may get less money back this year because pandemic benefits like the Child Tax Credit advance, and extra deductions for charitable donations, are no longer available. Rather, tax benefits are returning to pre-pandemic levels.
Tax Expertise For Today And Tomorrow
At Curio Wealth, we’re proactive when it comes to taxes. We don’t just review your finances from the last year to prepare your return for tax season 2023, we also look to the future to help you take advantage of tax savings opportunities at all stages of life.
With five Certified Public Accountants on staff, our team has serious tax chops. Our advisors combine their tax knowledge with financial planning and investment expertise to consider how your whole financial picture fits together. This way, we can minimize your tax bill and maximize your wealth. Want to learn more about our approach? Explore our tax services or schedule a call with us today.