Tax deadlines are coming up quickly! If you’ve been procrastinating filing your taxes, we know, it can be daunting and you may want to push it right up until that April 18th deadline. Yes, tax season can be a stressful time for many people. However, with the right preparation, you can make the process a lot smoother and even save some money in the process. In this post, we’ll provide you with a comprehensive tax preparation checklist for 2023 that covers everything from beginning to end.
Before we get started, it’s important to understand the significance of tax preparation. Filing taxes is a legal obligation, and failure to do so can result in penalties and interest charges. Additionally, being prepared and having knowledge of current tax deductions allows you to maximize your refund or minimize your tax liability. With that said, let’s dive into our tax prep checklist for 2023. Also, at the bottom of this article, get your handy checklist to help your tax prep keep organized.
Prepared and Organized: Gather Personal Information
The first step in tax preparation is to gather all the necessary personal information. This includes:
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Personal identification information: Your name, address, phone number, and date of birth.
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Social Security Number: You will need your Social Security Number (SSN) to file your taxes.
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Previous year’s tax return: If you have filed taxes before, you should have a copy of your previous year’s tax return. This will help you identify any changes in your tax situation.
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Income statements and tax documents: Gather all the documents related to your income, including your W-2, 1099s, and other tax forms.
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Investment income: If you have any investment income, such as from stocks or bonds, make sure to gather the necessary documentation.
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Business income and expenses: If you own a business or are self-employed, you will need to gather all income and expense documentation related to your business.
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Deductions and credits: Make a list of all the deductions and credits you plan to claim. This includes health and education expenses, property taxes, childcare costs, and donations.
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Any additional income: If you have any additional sources of income, such as rental income or alimony, make sure to gather the necessary documentation.
Determine Your Filing Status
Your filing status determines your tax rate and determines the amount of your standard deduction. There are five filing statuses: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child. To determine which filing status is right for you, consider your marital status, dependents, and other factors. Here are brief explanations of each filing status:
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Single: If you are unmarried, divorced, or legally separated, you can file as single.
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Married filing jointly: If you are married, you can file a joint return with your spouse. This is often the most advantageous filing status.
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Married filing separately: If you are married but want to keep your finances separate, you can file separately from your spouse.
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Head of household: If you are unmarried and have dependents, you may be able to file as head of household.
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Qualifying widow(er) with dependent child: If your spouse died within the last two years and you have a dependent child, you may be able to file as a qualifying widow(er) with a dependent child.
Prepare by Reviewing Your Deductions and Credits
Deductions and credits can significantly reduce your tax liability or increase your refund. It’s important to review all potential deductions and credits to maximize your savings.
Here are some common deductions and credits to consider:
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Standard deduction: The standard deduction is a fixed amount that reduces your taxable income. The standard deduction for 2023 is $12,850 for individuals, $18,000 for heads of household, and $25,700 for married couples filing jointly.
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Itemized deductions: You can also choose to itemize your deductions, which allows you to deduct specific expenses, such as mortgage interest, property taxes, and charitable contributions. Your tax professional can help you to know if itemizing is to your benefit or if the standard deduction would be a better choice for your situation.
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Child tax credit: If you have children under the age of 17, you may be eligible for the child tax credit. For 2023 filings, the maximum credit is $2,000 per child. For more on the child tax credit, there is a substantial article on it in the Wall Street Journal.
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Earned Income Tax Credit (EITC): The EITC is a credit for low- to moderate-income working individuals and families. The credit amount depends on your income, filing status, and number of children.
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Retirement contributions: Contributions to a traditional IRA or 401(k) can reduce your taxable income.
Check for Changes in Tax Laws
Tax laws change every year, and it’s important to stay up to date on any changes that may affect your tax situation. For example, the standard deduction and tax brackets may change from year to year. For filing in 2023, the tax brackets have been adjusted for inflation. The standard deduction has also increased from the previous year.
File Your Taxes
Once you have gathered all your personal information, determined your filing status, reviewed your deductions and credits, and checked for any changes in tax laws, it’s time to file your taxes. There are several ways to file your taxes:
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File online: The IRS offers several online filing options, including Free File and IRS-approved commercial software such as TurboTax.
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File by mail: You can also file your taxes by mail using Form 1040 and send it to the appropriate address.
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Hire a professional: If you have a complicated tax situation or simply don’t want to deal with the hassle of filing your taxes, you can hire a professional tax preparer.
Tax Prep Wrap Up
Tax preparation can seem overwhelming, but with the right preparation, it can be a breeze. Remember to gather all your personal information, determine your filing status, review your deductions and credits, check for changes in tax laws, and file your taxes on time. This year taxes need to be submitted by April 18, 2023. By following this tax preparation checklist for 2023, you can minimize your stress and maximize your savings.
To make organizing your tax information even easier, we’ve compiled this checklist for you! Download the free Tax Preparation Checklist here!
Certainly, filing taxes is an important part of adult life, but it doesn’t have to be a stressful one. With the right preparation and knowledge, you can make the tax preparation process easier and even save some money in the process. We hope this has been helpful and wish you a stress-free tax season!
