For most Americans the deadline to file 2022 federal income taxes with the Internal Revenue Service (IRS) is Tuesday, April 18, 2023. Taxpayers could begin submitting their tax returns as early as January 23, 2023, the official start of 2023 tax filing season.

When preparing to file federal taxes with the Internal Revenue Service (IRS) there are a few things to do in advance. Doing these not only helps to save time when completing the forms, but also helps safeguards against omitting information or making filing errors.

• Gather tax documents.
• Store documents safely and securely.
• Compare tax preparation options.

Some taxpayers think they don’t have to file taxes if they don’t make a lot of money. Although some people are exempt from taxes, this may happen only occasionally. It is rare to not have to file tax return. If you are under 65 and make more than $12,950 for single filers or $25,900 for married filers, you must file a tax return for 2022. Because tax credits can lower the amount of tax owed or increase the amount of a tax refund, filers may get a refund even if they don’t owe any money for taxes. For those who qualify for such tax credits, they must file in order to receive the refund.

1. Gather Tax Documents

It is wise to collect tax-related items and information throughout the year to prepare for tax season. If you plan to itemize rather than take the standard deduction. When a tax filer itemizes taxes, they can decrease the taxable income by deducting certain expenses allowed by the IRS. Though the documents needed to file taxes vary by person, there are a few documents that all filers need.

• Personal Information: Social Security number, name, birth dates for filers and dependents
• Income Earned/Received:
  • W-2 forms, various 1099 investment, unemployment/SSI, or tax return income forms
  • Business: profit/loss statement, capital equipment information
  • Miscellaneous: Any other income such as scholarships, gambling winnings, medical savings accounts (MSA), alimony received
• Income Adjustments:
  • Pre-tax deductions paid from salary such as IRA contributions, Health Savings Account (HSA), alimony paid
• Deductible Expenses:
  • Purchases made for career such as those for educator, alimony paid, Keogh (tax-deferred pension plan available for the self-employed or unincorporated businesses), Simplified Employee Pension Plan (SEP), SIMPLE (small employers), and other self-employed pension plans, moving expenses, or student loan interest

Those who itemize will need to collect additional documents. Some possible itemized categories are childcare, adoption, charitable donations, disaster and loss, medical deductions. You will also want to keep receipts for work or school related purchases, monetary or in-kind donations (ex: clothing, furnishing, supplies), mileage logs for miles driven for business, and  medical expenses.

For a checklist of tax documents to keep on hand, see Worksheet 6. Tax Preparation and Record Keeping Log on page 25 in the 2023 WISE Money Management calendar.

2. Store Documents Safe and Securely

It is important to keep tax documents in case you are audited by the IRS. You will also need proof of income if you apply for a loan, mortgage, or college financial aid when filing the Free Application for Federal Student Aid (FAFSA). The length of time to hold documents depends on the type of documentation and the filer situation:

• 3 years: All tax documents, especially W-2, proof of income should be kept a minimum of three years.
• 6 years: If a tax filer underreports income tax documents should be kept at least six years.
• 7 years: If a filer claims a loss on taxes, they should keep documents at least seven years.
• Indefinitely: Records of capital assets, major home improvements, purchase, and sale documents for assets like stock or property should be kept forever.

It is wise to keep both paper and digital copies of tax documents. Have a designated place to store physical tax records so that you can locate them easily and keep them safe from fraud or theft. Be sure the location is dry, safe, and secure. For paper copies of documents consider purchasing a locked file cabinet or a small compact size safe box at an office supply store or big-box retailer. Locking file cabinets cost between $40 and $500, and safe boxes range from $30 to $150 depending on size and features.

For Digital Files

Take photos or scans of tax documents and upload them in a single shareable document so that they are always easily accessible to you. It’s also a great backup up in the event that the original documents are damaged or lost. It’s very important to set a password to protect the tax file from being opened or accessed by someone without your knowledge or permission. All common platforms such as Google Drive and Microsoft allow users to password protect documents and files.

3. Compare Tax Preparation Options

Before filing taxes it is good to have an idea of all of the options available to successfully file.

• File yourself using the IRS Free File.
• File yourself using online guided assistance third-party commercial tax preparer software or website.
• Hire a commercial tax preparation firm.
• Hire a tax professional such as an accountant, financial advisor, certified public accountant (CPA), or certified financial planner (CFP).

For a list of authorized providers search the Authorized IRS e-file Provider Locator Service on the IRS website.

Many people decide to file their own taxes, while others do not feel equipped or interested in completing their own taxes. Tax filers might consider hiring a professional if they agree with any of the below:

• Have comfort with financial forms
• Have at least 5-7 hours to prepare and file taxes for simple taxes, or up to 20 for more complex tax situations
• A business owner
• Plan to itemize deductions
• Have other complex tax situation such as extensive investments, multiple properties or other assets, or perform gig or contract work.

4. When to File

Tax season officially began on January 23, 2023, but taxpayers have until April 18 to file. Generally, the best time to file taxes is as soon as you have gathered all tax documents. For a tax document checklist see the Preparation and Record Keeping Log on page 25 in the 2023 WISE Money Management calendar.

Filing early can also save filers money since many commercial tax preparers run promotional pricing in late December and early January to attract new or repeat clients. Taxpayers who file electronically typically receive returns more quickly. If you expect to receive a tax return owed you, consider filing electronically and opting for direct deposit to get your monies as soon as possible.

If a taxpayer files tax returns after April 18, 2023, the IRS could assess a late-fee penalty of up to 5% per month up to 25% of a tax amount owed. Request an extension from the IRS if you expect to delay tax return completion until after April 18, 2023. A tax extension request must be made by April 18, but gives filers until October 16, 2023, to file tax returns. It’s important to note that an extension does not automatically prevent late penalties for taxes unpaid as of April 18. For information on an extension of time to file a tax return see the IRS website.

5. Checklist for First-time Filers

If you are filing taxes for the very first time, there are a few things that can help with filing success and make the process smoother. In addition to gathering documents in advance and comparing filing options new filers can:

• Ensure that no one else can file you or does file you as a dependent on their return. This is especially important for young adults, or those who receive financial assistance from parents, guardians, or relatives. Even if someone else claims you on their taxes you may be able to file a return to claim specific benefits such as education tax credits. If you think someone else may claim you on their taxes, talk to them before you file a tax return to avoid conflicts or the need to amend a return later.
• Seek out tax deductions or tax credits for which you may be eligible. Some common tax credits and deductions are:
  • Child tax credit for those with qualifying child up to age 18
  • Earned income tax credit for low-to-moderate income filers
  • Lifetime learning credit for those enrolled in higher education
  • American opportunity tax credit for first-time college students during first 4 years in school
  • Student loan interest for those making payments on an educational loan
  • Child and dependent care credit to claim care-related expenses
  • Saver’s credit for contributing to an individual retirement account
  • Health saving account for contributions made to your HSA
  • Charitable contributions for money or property donated to a qualified organization

More Information

Learn more about money management by following guidelines from the 2023 WISE Money Management calendar or by visiting www.aces.edu.