While doing your taxes is never fun, these five tips can help filing your 2022 tax return feel much less tedious.
Tip #1: Leverage Technology
If you are planning to file without the help of an accountant or advisor, you may find it worthwhile to use tax preparation software (like TurboTax or HR Block), or even the IRS's e-file system. You can input the information, and the software will do the math and populate the numbers for you. Utilizing software can help you meet compliance requirements and help streamline the process, which in turn can potentially speed up the time it takes to receive your tax returns.
Tip #2: Accuracy Over Speed
Getting an early start on the filing process can allow you the time necessary to check and double-check your returns before mailing or e-filing. Ensure eligibility under current IRS rules before claiming deductions, as regulations may vary annually.
Keep a record of all documents and rely on them when preparing your taxes. Utilize automated systems to input reported income, interest, and dividends into tax software. When estimating a refund, an estimate is acceptable, but always report accurate information to the IRS.
Tip #3: Report Everything
You may have made several charitable contributions last year or had several income streams. Perhaps you had a few investments that didn’t yield much. Make sure to declare all sources of income and charitable contributions on your tax return, whether large or small. Tax preparation software will detect significant donations or earnings and adjust tax liability accordingly. Over-reporting is preferable to omitting information, as the IRS may find out about unreported income through mandatory reporting requirements. Failing to report income could result in additional tax owed in the future.
Tip #4: Choose Between Standard Deduction & Itemizing
The IRS offers a standard deduction as a simplified filing option. For 2022, single filers can claim a standard deduction of $12,950, married couples can claim $25,900, and head of household can claim $19,400.1 Using the standard deduction reduces taxable income, but itemizing deductions may result in an even lower taxable amount. Common itemized deductions include:
- State and local taxes
- Charitable contributions
- Casualty loss
- Business expenses for which you weren’t reimbursed
- Medical expenses
- Mortgage interest
If you’re already an itemizer, you should be sure to check to see how the most recent changes in the tax code may have (or may not have) affected certain deductions.
Tip #5: Understand Tax Credits
Tax credits lower the amount of tax owed, unlike deductions that decrease taxable income or affect tax bracket.
An example of a tax credit is the Earned Income Tax Credit, providing tax relief for low- to moderate-income workers and their families. If eligible, the credit can reduce tax owed, potentially increasing the tax return. 2
A report by the Treasury Inspector General for Tax Administration states that 5 million taxpayers who may qualify for the credit fail to claim it each year, resulting in $7 billion of unclaimed benefits annually.3 To avoid missing out on potential tax credits, check if you are eligible for them.
Consult a trusted tax professional, like a CPA, for any tax-related questions this year. An expert can provide answers and give you the confidence to start tax season with peace of mind.