IRS highlights small business tax resources during NSBW
Family business tax considerations

May tax moves that may make for merrier tax savings

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May. A short word with many meanings.

It's the name of the fifth month of the year. Here in the Norther Hemisphere, it's when springtime comes in fully. That's fitting, since its name comes from Maia, the Greek goddess of spring and growth.

The Oxford English Dictionary also says the word is a verb that expresses possibility, as in "that may be true," or permission, as in "may I ask a few questions?"

When it comes to taxes, I like to combine the meanings. May is a time of growth and renewal and the possibility of making positive tax changes.

With that perspective, this 2023 version of May Tax Moves looks at what's possible — and what should be accomplished — this month. Below are four such situations.

1. Some New Yorkers need to file returns. During Christmas week 2022, areas of the Empire State were slammed by a devastating blizzard. The affected areas are Erie, Genesee, Niagara, St. Lawrence, and Suffolk counties. As is usual practice after major disaster declarations, the Internal Revenue Service extended some tax deadlines for the affected residents to May 15.

This mid-May due date is the new 2022 tax return Tax Day for these New Yorkers, as well as the deadline for them to make the first estimated tax payment for 2023. In addition, eligible taxpayers also now have until May 15 to make 2022 tax year contributions to their IRAs and health savings accounts (HSAs).

The New York disaster deadline move to May also is a reminder for us all to keep an eye on severe weather, especially with the hurricane season official start on the horizon. But severe weather can strike at any time. Know which natural disaster is common in your area, and get ready now. You can find my prior posts full of readiness tips, including related tax matters, at the ol' blog's Storm Warnings page on preparing for disasters.

2. Adjust your withholding. What was your tax liability when you filed your taxes in April, or paid what you owed when you got an extension? If it was a lot more than you expected, adjust your withholding. Now. This will spread any additional withholding you need to have taken from your pay over more months, making the per-paycheck bit less jarring.

Tweaking your withholding is also a good idea if you got a big refund. Yes, I know lots of y'all like to use over-withholding as a forced savings account. But it means you don't get the use of your money throughout the year. I have some suggestions of other options in my post, Tax refunds are nice, but savings provide a better payoff. Plus, you have to wait for the IRS to send you your refund and, let's be honest, sometimes that takes longer than the agency's 21-day turnaround.

IRS.gov's online tax withholding estimator can help you determine the correct amount of income tax withheld from your wages. It's available in English and Spanish.

3. Store your 2022 return material, set up a system for 2023. What did you do with all those documents you used to file your tax return? If they're shoved in a drawer, dig them out again. Now it's time to store them. My earlier post with tax recordkeeping tips has some suggestions.

The key record that everyone should keep forever is your actual Form 1040. Note, though, that this isn't just the 1040 itself, but all the supporting forms and schedules.

These official tax documents, either as paper or digital copies (or both if, like me, you're obsessive about documentation) are proof you met your annual tax-filing obligation. They also come in handy if you later find you need to file an amended return or want to apply for a loan.

Now use this as a template to set up your 2023 tax records system. Getting your receipts, statements, and other tax-related records together and in an easily accessible order now will help make for smoother filing next year.

4. Find summer care for your kids. School is winding down, so now it's time to figure out how your children will be occupied, and taken care of, during the summer months while you're at work. One option for older youngsters is day camps.

The good tax news for these day-only camps is that their costs count toward claiming the child and dependent care credit. There are limits, both on the income for claiming taxpayers and the amount the tax credit provides. Also note that this tax break is not as generous as it was during a temporary expansion during the height of the COVID-19 pandemic.

Still, any help from good old Uncle Sam is welcome. And since this is a tax credit, qualifying working parents could get a dollar-for-dollar reduction of any tax owed.

More May tax moves: I know, all y'all who finished your 2022 returns were hoping for a merry May free of tax considerations. Sorry.

But some of these tax moves now can help you make any remaining tax tasks easier. They also can help you save on your already accruing 2023 tax bill.

So can some more May Tax Moves over in the ol' blog's right column. As is the custom, these monthly pieces of tax advice are listed under the countdown clock that's keeping track of the arrival of October's tax extension filing deadline.

If any of these tax actions apply to you, make them. Then, when you're done with all the tax moves that apply, have the merriest May ever.

 

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