The 2023 tax season is already upon us. With the help of this article, we’ll talk you through some best practices to get ready for your 2022 federal tax return.
The 2023 Tax Season is Upon Us
The time has come to start preparing for your 2022 federal tax return. Filing taxes can be a daunting task, but with the right knowledge and preparation, it doesn’t have to be an overwhelming experience.
It is important to understand the process and all the necessary steps involved so you can feel in control of your finances and avoid any potential problems or delays, especially as we approach the upcoming tax filing season.
Preparing for the 2022 federal tax return is an important part of managing your finances. It’s important to understand the process and be aware of any changes to the tax code that might affect you. Let’s discuss helpful tips on organizing your documents, understanding deductions and credits, filing deadlines, and more.
Check Your Bookkeeping
Just like packing for an extended vacation, you can’t successfully prepare for tax season in one day. You’ll forget things or leave out important assets, and it’s much more annoying to make changes to your taxes when they’re being prepared and processed.
The best practice for your 2022 federal tax return (and every tax return in the future) is to make sure you are tracking and recording your transactions and important paperwork as it is created, not after the year is over.
You also want to ensure that your bookkeeping is consistent – monthly expenses for a renovation or new product or service venture should be consistent in their classification. For example, if you have a web developer creating and updating an app for your business, you can’t record those expenses as “investments” one month and “marketing expenses” the next. Consistency is key.
Reconcile Your Bank Accounts for the 2023 Tax Season
Reconciling your bank accounts just means making sure your books (whether you do them by hand or use a service like QuickBooks) match your bank activity. This is one of the reasons we always urge small and medium-sized businesses not to use the same bank account for business expenses and personal finance activities. Keeping things separate keeps them organized and makes it easier for you to find what you need during the 2023 tax season.
Avoid processing delays when you file your 2022 federal tax return early. In May 2022, the IRS was struggling to process tax returns – in fact, they still had more than 21 million unprocessed paper returns mid-year. This is an increase from past years. While they are taking steps to ensure the process gains efficiency in 2023 and beyond, it’s still important to know that the later you submit your own returns, the longer it will take to get them processed.
Remove the stress of a looming deadline. Things come up and sometimes your tax filing this year is harder or different than last year’s efforts. Give yourself (and your tax professionals) plenty of time, and you can avoid worrying about missing important tax deadlines applicable to your business as well as the extra fees and penalties that accompany them.
There are several other benefits to filing your 2022 federal tax return early, which include things like lowering your chances for identity theft, having an easier time finding and booking your favorite, more popular tax pros in your area, and more time to plan and adjust to any changes or new tax incentives that you may qualify for this year.
Filing Early Increases Accuracy
When you don’t feel rushed to complete your 2022 federal tax return because you didn’t want until the end of the 2023 tax season, you’ll find that you make fewer errors on your forms. This prevents you from having to file an amended return, which many believe is an invitation for an IRS audit.
Here are some things to check (or double-check) so you can file early and accurately:
- Review all official documents. When you are preparing your 1099s, W-2s, and other information returns, make sure you take the time to double-check the information therein, including any forms or documents from third parties, like other businesses, banks, financial institutions, or payment systems. It’s always worth it to spend the time and money to have your forms checked for accuracy.
- Make sure you aren’t still waiting on any forms. Sending and receiving a 1099 that was sent late could mean you have to refile or file an amended return. This is another great reason to double-check: it’s easy to forget that you’re still waiting on a form or a transaction document if you don’t have the rest of your tax-related information organized.
- Review any updates to tax laws. Our laws change every year – there’s no reason to miss out on a deduction or a credit because you didn’t qualify last year and you didn’t bother to check this year.
Don’t Forget the Last 2022 Quarterly Payment
Another great tip for your 2022 federal tax return prep is to remember that if you or your business are paying estimated taxes quarterly for the tax year 2022, the final payment is due on January 17, 2023. You can use the IRS Tax Withholding Estimator to see if your withholding amounts need to be tweaked for the tax year 2023.
E-Filing Makes Prepping for Your 2022 Federal Tax Return Quick and Easy
In November, the IRS was already sharing tips, tricks, and news that could affect your 2022 federal tax return filing. They also reminded all of us that income earned from digital assets, gig economy, and other freelance, part-time, or contract work is almost always taxable income. Are you ready for the 2023 tax season?
eFile360 can help you e-file, organize, and store your information returns for the tax year 2022.
Sign up for a free eFile360 account today to get the ball rolling for the upcoming tax filing season and all the seasons to come.