February 2023 Tax Tips and More

Tax Tips and More
February 2023

 Upcoming dates:

February 14

 - Valentine's Day

February 20

 - Presidents' Day

Reminders

 - Organize filing records (1099s, 1098s, W-2s, etc.)

 - Schedule tax appointment for drop off or meeting

 - Begin tax planning for 2023

Now that tax documents have started arriving in your inbox and mailbox, it's easy to set them off to the side to worry about later. There may be some benefit, however, to filing your tax return as soon as you can. In this month's newsletter, read about several reasons why you should consider filing your return early.

As always, feel free to reach out with any question or comments.

Why You Should File Your Tax Return Early

Tax filing season officially began on Monday, January 23rd. Not many people file that early, but for some taxpayers it makes sense to do so. Here are common reasons to consider trying to be at the head of the line:

• You want to avoid identity theft. One of the more popular scams by identity thieves is to impersonate someone, file a tax return on their behalf and swipe their refund check. But once you’ve filed your tax return, the window of opportunity for identity thieves closes. If you’ve had problems with your identity being stolen in the past, or your information has been compromised, consider filing as early as you can.

• You want to avoid a dependent dispute. One of the most common reasons a tax return is rejected by the IRS is when you try to claim a dependent who has already been claimed by someone else. This often occurs when there is shared custody of a child.

• Someone needs a completed tax return from you. Completing certain transactions require your most recent tax return as evidence of your income, for example when you buy a house. Consider filing your tax return early so you can provide current tax information. This is especially important if you are self-employed and don’t have regular salaried pay stubs to use as proof of income.

• You need the refund ASAP. Of course everyone would like their refund as soon as possible. One thing to remember, though, is that while the IRS started accepting returns in January, they won’t begin processing them until mid-February. Returns that claim the Earned Income Tax Credit and the Additional Child Tax Credit will see processing of their returns start some time after Feb. 15. But otherwise, the sooner your tax return is in the queue, the sooner you should receive your refund.

• You just want to get it out of the way. Nothing reduces the stress of filing your tax return better than just getting it done. Instead of thinking about your return for several months and potentially running into a time crunch as the April filing deadlines gets closer and closer, you may want to just get it over with and file your return as soon as you are able.

Tips to Make Sure Your Tax Return Doesn't Get Stuck!

Here are several ways to make sure that your tax return is prepared and filed as quickly (and as accurately!) as possible.

• Keep tax documents in one place. Missing tax documents are one of the biggest reasons that filing a tax return gets delayed! If you receive documents via both physical mail and e-mail, it's even more important that you have one place to store all your documents once you receive them.

• Organize your tax documents by type. To help make filing your tax return as easy as possible, sort your tax documents in tax return order. Glance through last year's tax return and create a folder for each section including income, business and rental information, adjustments to income, itemized deductions, tax credit information, and a miscellaneous bucket.

• Create list of special events from the previous year. You receive a Form W-2 from your employer every year. If you're in business, you probably receive a Form 1099 from certain clients each year. But certain tax documents you won't see each year. Selling a home doesn't happen every year for most people. Likewise with getting married (or divorced) or sending a kid to college. So create a list of special events that have happened over the past year, as some of these occasions may affect your taxes.

• Don't forget your signature! You (and your spouse, if married) must sign and date your tax return if physically mailing it to the IRS. Forgetting your signature could delay the processing of your return (and potential tax refund!) by up to several months. If e-filing, don't forget to sign Form 8879. This form authorizes the e-filing of your tax return.

• E-file your return. The IRS has struggled over the past 3 years to process paper-filed tax returns. In 2021, this backlog reach more than 20 million tax returns. You can avoid getting your physical return potentially misplaced by the IRS by e-filing. Even better, you can typically receive any refunds within one to two weeks when e-filing.

These are some of the more common reasons why the preparation and filing of your tax return may get delayed. Be prepared and file your return this year without a hitch!

Save Your Business Time and Money by Getting Organized

Here are some suggestions to help you master the art of documenting and organizing your business now and in the future.

• Document policies and procedures. Write down daily responsibilities, skills needed to complete tasks related to these responsibilities, and the location of all paper and electronic files. Appoint and cross-train backup staff to ensure these daily tasks are done.

• Document your succession plan. It may not be for another 10 or 20 years, but documenting your succession plan is critical for both you as the owner and for your employees. Consider how much longer you plan on owning the business and who you have in mind to take over after you leave. If you currently don't have a successor in mind, document your plan to either train or find this person(s).

• Document your tax planning strategy. Be aware of possible tax incentives, such as credits for hiring certain workers and accelerated depreciation available for acquiring business assets. For example, for asset purchases, retain receipts and record the purchase details. These details include the type of equipment, the acquisition date, the amount of the purchase, the date you began using the equipment, and a schedule of related set-up costs.

• Organize your daily documents. Organize your desk by shredding documents with sensitive information and scanning older papers into computer files. The most efficient method is to scan, file, and shred as soon as you are finished with a document. If you don’t have time, consider assigning document organization to specific employees and making it a task to be completed on a daily basis.

You’re busy, and you may feel that organizing your records will take more time than you have available. But spend a minute and consider how using these organizational tips may save you not only time, but money as well.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

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