Tax moves to make in February 2023
Sunday, February 05, 2023
Hello, February! Yeah, I know my regular monthly tax moves post is late. But February started off here in Central Texas with a nasty ice storm that knocked out our power for four days, and I'm still catching up on delayed blog (and real life) tasks.
I appreciate your patience and understanding.
So, since we're already on this shortest month's fifth day, and nobody wants to hear my continued whining about the storm and our local electric company, let's get right to some fun stuff. Like February Tax Moves!
Here are three to consider this month.
1. Collect your tax statements.
By now you should have received all those tax statements you need to file your 2022 tax return. Based on my personal experience, though, some issuers are slow this year. We're past the Jan. 31 delivery date, and I'm still waiting for a half dozen of them. And yes, I have checked the issuers' websites where available; no 1099s to download yet.
These myriad statements detail how much money you made last year from job(s), both as a salaried employee or as a contractor/gig worker; investment earnings; unemployment benefits; and even from prize or gambling winnings.
Other tax-related documents have important information on items, such as mortgage interest or charitable donations, that can help you trim your tax bill.
You can get an idea of what statements you might still be missing by reviewing last year's filing. You can contact those tardy issuers to find out if the statements are indeed on their way.
I know eager filers are frustrated by having to wait for these documents, but take a breath, brew a cup of herbal tea, and hold off filing until you get them. Once you do get the forms, double check them. That's the only way you can be sure you enter the correct info on your Form 1040.
And you definitely want your filling to be accurate. The IRS gets copies of these third-part reporting statements, and it will let you know if it finds a discrepancy in its duplicate and what you put on your return.
2. Familiarize yourself with expired COVID-enhanced tax breaks.
After two filing seasons dealing with tax laws changed because of COVID-19, we've gone back for the most part to the plain old Internal Revenue Code for the 2023 filing season. This reversion mainly affects some popular tax credits, which offer dollar-for-dollar reduction of any tax you owe.
Many of the pandemic-prompted changes that increased the Child Tax Credit (CTC) were not extended for the 2022 tax year. The biggie is that the CTC returns to $2,000 for each qualifying child. Plus, the amount of the credit that can be claimed as a refundable amount — that's any credit left over after it zeros out what you owe — is again limited.
The tax credit for the cost of caring for the kiddos and other eligible dependents also goes back to its lower, pre-coronavirus level. For 2022 returns, the Child and Dependent Care Credit amount of allowable expenses is again $3,000 for one qualifying person and $6,000 for two or more qualifying dependents. The maximum credit is 35 percent of your expenses.
Single filers who got a boost from the Earned Income Tax Credit (EITC) also are out of luck this filing season. The COVID-prompted enhancements for taxpayers without a qualifying child expired. My post on the current EITC has details on this tax break, which at least remains fully refundable.
And a 1099-K reporting change that was to go into effect has been postponed by the IRS. Instead of the lower $600 received from a third-party payment platform, those tax statements will be issued only to those hitting the $20,000 amount already in place. Some issuers might have sent out the lower-level statements anyway. If you get one, make sure it's correct.
Also remember that even if you don't get any type of 1099 for nonwage earnings, in most cases you still owe tax on that nontraditional income.
If you've hired a tax preparer, that tax pro will help you sort out the credit and other tax changes and take advantage of those for which you qualify. Tax software also can help walk you through the changes.
But it's good to be aware of them before you input the numbers and suddenly see that your tax refund this year is much less, based on prior filings, than you expected.
3. Get your 2021 return out of the way.
No, that year is not a typo. Some taxpayers last year got more time to finish their 2021 returns because they were hit by major natural disasters as tax deadlines neared.
These taxpayers, who live in five states and a U.S. territory, now are facing a mid-February deadline for that prior year return.
The new Feb. 15 filing deadline is for —
- Florida taxpayers who were in the path of deadly Hurricane Ian;
- South Carolina taxpayers who were hit by Ian's second landfall;
- North Carolina taxpayers who lived where Ian moved further inland;
- Puerto Rico taxpayers who endured Hurricane Fiona;
- Mississippi taxpayers in Hinds County who suffered a municipal water system failure caused by flooding; and
- Alaska taxpayers who dealt with disruptions from storms and flooding.
In most cases, these taxpayers with extra filing time had filed for an Oct. 15 extension to get their returns to the IRS. In some cases, some estimated tax payments also were postponed until this month.
More February tax moves: OK, that's enough to get your tax tasks started in this short month that's already underway. But if you do want more, check out the ol' blog's right column.
As usual, there you'll find some additional tax-wise ways to fill the rest of February's 28 days, which, by the way, are this weekend's By the Numbers figure.
They're listed under the February Tax Moves heading, just beneath the countdown clock that's keeping track of how many days until we get to 2023's Tax Day on April 18.
And just in case you really, really want to fill up February with taxes, you can keep track of additional tax tips at the month's tips page, which will grow as the days pass.
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