Don't Mess With Taxes

Most taxpayers will never be as chill as this tabby, especially now that the annual tax filing season is here. But these tips could make the tax task a little easier. (Photo by Jacalyn Beales on Unsplash)

If you've already got your 2023 tax return ready to send to the Internal Revenue Service tomorrow, Jan. 29, when the agency starts processing filings, you can peruse other items on the ol' blog. (Thank you!)

If, however, you're not quite ready yet to tackle Form 1040, I got you. Even when your taxes aren't complicated, many of us dread filling out tax paperwork.

But don't let that tax worry take over your life. Here are nine ways to make filing your return a bit easier.

1. Gather all your tax documents. Being organized doesn't guarantee a smaller tax bill, but it definitely helps ensure you don't overlook potential tax breaks. So if you haven't already collected the tax statements you need to fill out your tax return, do that first. Some tax docs arrived in your snail mail box. You got electronic alerts for others, letting you know the statements are ready to be downloaded. Most are due to you by Jan. 31, so it's possible your gathering will show that you're still waiting on some that some slowpoke issuers. Filing will be much easier if you don't start until you have all these documents.

2. Don't freak out about Form 1099-K. Form 1099-K has been in the news for years. During that time, the changing rules about its issuance has caused added tax trepidation for many folks who get gig earnings.

The American Rescue Plan passed during the COVID-19 pandemic included a provision requiring third-party settlement organizations (TPSOs) — Venmo, CashApp, eBay, Etsy, PayPal, and even TicketMaster resellers — to report transactions on Form 1099-K if the recipients got at least $600. That was a major change from the previous $20,000 threshold, and the lower limit was to have taken effect  in 2022.

However, confusion and complaints prompted the IRS to delay that lower 1099-K reporting until 2023. More complaints and confusion then prompted the IRS last year to again postpone enforcement of the 1099-K changes. Now companies don't have to send 1099-K forms until 2025, and then only if the amount of transactions this year totals $5,000 or more.

So if you were expecting a 1099-K, you can stop waiting. Some TPSOs might send them, but many are taking advantage of the IRS' second delay. Remember, however, that you still have to report all your taxable income, regardless of whether you got a 1099-K or any other version of 1099.

3. Check into whether tax changes might help you. There weren't any major tax law changes in 2023, the 1099-K changes notwithstanding. But some earlier tax code revisions that cover several years might apply to your 2023 return. This includes Inflation Reduction Act of 2022 climate change provisions that could save you as much as $1,200 in tax credits if you made energy-efficient changes to your home. The car you bought last year could get you another credit of up to $7,500 if it's a qualifying electric vehicle. More basic changes include the annual inflation adjustments that, among many other things, widened 2023's income tax brackets.

While I'd love for you to click through the ol' blog's postings (notably the monthly tax tips) to read about changes, you can get a preview at IRS.gov with the agency's Interactive Tax Assistant (ITA). The ITA provides answers for general questions, such as determining your filing status, if you can claim dependents, or if you have to file a tax return. If you do have to file, the ITA can help you determine if a type of income is taxable, if you're eligible to claim certain credits, or if you can deduct expenses on your tax return.

4. Don't guess at deductions. As for deductions detailed on the ITA, if you're like most taxpayers, you'll find claiming the standard deduction is the better, and easier filing method. That said, some taxpayers do find that itemizing gives them a lower tax bill. If you're one of them, make sure you have all the supporting information and material — see tip #1— for those Schedule A claims. There's absolutely nothing wrong with claiming all the tax breaks to which you're entitled. Just make sure you have the receipts to back them up if the IRS has questions. And definitely don't guess at amounts. Estimating deductions and submitting those amounts as a series of round numbers is a good way to arouse IRS interest in your filing.

5. Do your taxes electronically. You probably don't need much convincing to take the electronic route. Last year, out of more than 162 million returns the IRS received, more than 150 million of them arrived electronically. Tax software walks you through the preparation process and then lets you e-file. Electronic returns also mean the IRS can get right to work on your filing, rather than entering information from a mailed paper form. And that means you'll get your refund sooner. When you e-file and ask for direct deposit of your refund, the IRS says it should arrive within 21 days. It takes about twice that long for refunds to be issued to taxpayers who file paper returns.

The IRS is rolling out its Direct File pilot program this year, where taxpayers in 12 states — Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming— will be able to complete and then electronically send their returns to the IRS. But if you don't want to wait, or you're not in one of those locales, check out Free File. It's open to taxpayers whose 2023 adjusted gross income was $79,000 or less. Eight tax software companies are participating this year.

6. Get tax help. You started doing your taxes yourself, using tax software, but even that was Just. Too. Much. That's OK. Stop. Take a breath. Then get some help.

Photo by Nataliya Vaitkevich

If you decide you need help from a tax professional, however, be prepared to wait. Reputable tax pros are now working with clients who came to them well before filing season started. They might take you and your return on, but you'll likely go to the end of the line, and could even have to file an extension. But if you want your taxes done correctly, not just rapidly, then start your tax preparer search now.

You also can look into the help offered at Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) sites. IRS-trained volunteers at the sites are ready to help qualified taxpayers complete and file their returns.

7. Figure out how you'll pay. If you find you owe taxes, you need to determine how you will pay Uncle Sam. You have until Tax Day, which is April 15 this year, even if you decide to file your return before them. That gives you around two and half months to come up with the payment.

You always can mail the IRS a paper check or money order. But as with returns, the IRS encourages electronic payments. It offers several ways to e-pay your tax bill. And if you find you owe too much to pay in one lump sum, Uncle Sam's tax collector also has a variety of options that spread tax payments over time.

8. Create an IRS Online Tax Account. One way to pay, either immediately or with an installment plan, is through your personal online taxpayer account at IRS.gov. With an online tax account you also check the amount you owe and a breakdown by tax year, as well as get your tax documents without having to mail or call the agency. You also can use the online portal to choose IRS communication preferences, such as having the IRS email notices to you rather than sending them via the U.S. Postal Service, and authorize a tax professional to work on your behalf. The one thing you can't do with an IRS online account is file your tax return.

9. File for an extension. I know we're just at the official start of the 2024 tax season, but you also need to be aware of the end of it. That's April 15 this year, unless you get an extension. By filing Form 4868, Extension to File, on or before the April tax due date, you'll have until Oct. 15 to get your return to the IRS.

Note that this is just an extension to file your forms. If you find you owe, you must pay that amount or a close estimate of it by April 15 or the IRS will start tacking on penalties and interest to the unpaid amount. The late-filing penalty is 5 percent per month of the tax owed. The late-payment penalty is 0.5 percent a month of the tax due. If after five months you still haven't paid, the failure to file penalty will max out, but the failure to pay penalty continues until the tax is paid, up to its maximum of 25 percent of the unpaid tax as of the due date. By filing Form 4868, you can at least stop the clock running on the costly late-filing penalty.

Here's a bonus tip. Don't panic. Yes, tax season is here. Yes, you must file a return and pay any due tax. But you've got time. Take it, and do your taxes right.

You also might find these items of interest:

• Tax pre-filing checklist questions
• FTC slams TurboTax for deceptive free filing offers
• Mark your tax calendar: Key 2024 federal tax dates

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