Don't Mess With Taxes

Image by Pintera Studio from Pixabay

We're two days into the New Year. Feel any different? Aside from thinking it's a Sunday instead of Monday, me neither.

But some things, in addition to flipping calendar pages, have changed.

From a tax standpoint, you'll see some differences, starting with those calendars. Weekends and holidays will shift some regular tax deadlines to new days.

You also could see some differences on your 2022 Form 1040, thanks in part to tax breaks that no longer apply. Those changes are just a few things to note as we head into the 2023 tax year.

But let's not get too ahead of ourselves. Instead, let's focus on this first month of the new year.

Specifically, here are four tax moves to make this January 2023.

1. Pay your estimated taxes. Yes, Uncle Sam has his hand out early every year. The middle of January is a tax pay day for the millions of filers (including me!). We must close out the 2022 tax year by sending the Internal Revenue Service our final estimated tax payment for the prior year.

That due date is Jan. 15, but since that's a Sunday this year, it's due the next business day. But in 2023, that's not Monday, Jan. 16. That's Dr. Martin Luther King Jr. Day, and that federal holiday means the estimated tax deadline is Tuesday, Jan. 17.

Get used to this. The tax calendar weekend and holiday convergences happen a few more times in 2023. But back to the upcoming Jan. 17 estimated tax payment.

These four extra payments are due on earnings that aren't subject to payroll withholding. This includes such things as investment proceeds, prize money, and income from gig jobs.

The IRS prefers we make a close guesstimate of such amounts we'll get in a tax year, figure the tax due, and pay it in four equal installments. The table below shows the dates the IRS expects the money.

You can make this final payment (and others) electronically or, if you choose the snail mail route, by submitting the appropriate 1040-ES voucher. The full estimated tax packet includes mailing addresses in the instructions.

You actually can skip this final estimated payment if you're sure you'll get your 2022 tax return filed and, if you owe, will pay any due taxes by Jan. 31. Don't take this informal extension lightly. Good intentions don't count.

If you miss the January estimated tax payment and then don't file your annual return by the end of the month, the IRS Uncle Sam will hit you with penalties for not paying your estimated taxes on time.

2. Double check your deadlines. While millions of us will be dealing with the slightly later January estimated tax due date, some folks' calendars are extended even longer.

Unfortunately, the reason they get more time to meet the 1040-ES and some other federal tax obligations is not a welcome one. They endured major natural disasters.

Five states and a U.S. territory now have a Feb. 15 due date. Mark next month's calendar if you're a —

• Florida taxpayer still dealing with the aftermath of deadly Hurricane Ian;
• South Carolina taxpayer slammed by Ian's second landfall;
• North Carolina taxpayer hit when Ian moved inland;
• Puerto Rico taxpayer who endured Hurricane Fiona;
• Mississippi taxpayer in Hinds County, where a municipal water system failure caused by flooding; or
• Alaska taxpayer who dealt with disruptions from September 2022 storms and flooding.

And residents of Florida who were hit early last November by Hurricane Nicole have a March 15 deadline to make their final 2022 estimated tax payment.

UPDATE, Jan. 10, 2023: Severe storms and flooding over much of California prompted Federal Emergency Management Agency (FEMA) disaster declarations in 31 counties. Those residents and business owners also get tax relief, including a new May 15 filing deadline. 

Of course, if you are able to file earlier than your extended deadline, the IRS will gladly accept the paperwork and accompanying tax payments. But don't make a mistake by rushing.

3. Find and hire a tax professional. If trying to keep track of (and meeting) changing deadlines, understanding tax laws, not to mention actually filling out the myriad IRS forms keeps you up at night, then perhaps it's time to hire a tax pro.

Truth be told, you probably should have started your tax adviser hunt last year. But we are where we are, and January is a far better time than deeper into tax season to seek help.

So start now determining what type of tax pro fits your filing needs. The IRS' online credential tax preparer search tool can help.

Once you decide on a tax pro, then check out that person before finalizing your tax-help partnership.

Then be a good tax client. Following all your tax preparer's advice, including getting all the necessary information to your pro on time, will pay off for both of you. If you ignore that request and other guidance, you could find yourself fired, and have to go through the search process all over again next year.

4. Get organized: Regardless of whether you work with a tax professional or do your taxes on your own, generally using tax software, you'll need all your tax records. This includes tax a variety of tax documents — W-2s, 1099s, donation receipts, year-end account statements — that will soon be on their way to your email or snail mail box.

Don't forget your own documentation of taxable events that you, not third parties, kept. This includes records of expenses related to those side hustles on which you owe estimated taxes, as well as assorted medical expense records, including healthcare related mileage, and your list of last year's charitable donations.

This material is critical, especially if you still itemize. Thorough records are key in totaling all your tax-deduction eligible expenses so you can make sure they're more than your standard deduction amount.

Set up a system now to collect all this data, whether you already have it in hand or it arrives in the coming weeks. It can be either digital, with electronic tax copies going into a special folder on your computer. Or if you're old school and still rely on paper (no judging! I'm obsessive and do both paper and e-record keeping), your collection system can be as simple as an accordion folder, with documents dropped into the appropriate slots. Or you can use separate folders and/or envelopes to hold it all in a filing cabinet drawer.

The key is just to get all the tax-related information you'll need into one place so that when you do start filling out your 1040, or drop it off at your tax preparer's office, it's all there and easily accessible.

More January tax moves: I know, even these four tax moves seem like a lot, especially on what's an official Monday holiday and you're more interested in college bowl games.

But if you're a total tax geek determined to welcome New Year 2023 with even more tax moves, then check out the ol' blog's list of tax tasks in the right column. As usual, these added January Tax Moves are under the countdown clock. Yes, it's already ticking off the time left until our 2022 1040s are due on — wait for it; yes, another tax deadline calendar move — Tuesday, April 18.

But that later date is for, well, a later monthly tax moves post. Today, enjoy 2023's fresh new start. Then get to those January tax tasks!

Advertisements