Tax Filing 101: Everything You Need to Know to Make this Season a Success
Tax season is fast approaching, and, at EHTC, we know that it can bring added stress to our clients. The best way to mitigate some of that strain is to stay organized and stay on top of all the important details—and resist the urge to procrastinate until late February or March. While year-end and the new year can be busy times, carving out space in your schedule to get your paperwork and books in order will make the whole process run smoother.
Both clients and tax preparers alike can set themselves up for success by staying ahead of the mid-April deadline. By providing your documents in January or early February, you can create more time for communication between yourself and your accountants. These conversations can often breed insights that result in favorable differences to your bottom line.
And, speaking of communication, one of the best things you can do between now and when it’s time to file your taxes is to inform your accountant of when you expect to have all your information ready. This helps keep you accountable and it helps your accountant plan out their busy season.
Another tip for success this tax season is to notify your preparers of any major changes in your tax situation prior to the filing season. Actions such as selling your home, receiving social security benefits for the first time, or buying or selling a business can have an impact, and it helps your accountant to know what to expect before getting started on your return.
As you begin to get your elements in order, take inventory of your money moves during the year and understand what each move entails. Keep your year-end brokerage and bank statements in one location, so you don’t have to dig them up later. If you have received distributions from retirement accounts or from your other investments, confirm where they came from, so you can expect who you’ll receive those statements from.
While you might not begin receiving some of your tax-related items until late January, it’s wise to have a checklist of what you’ll likely need to provide, and a designated place to collect them. Common items to be on the lookout for or to seek out include: W-2s, 1099s, 1099-Rs, 1099-Bs, K-1s, SSA-1099s, 1098s, 5498s, Property Tax statements, Charitable Contribution receipts, and Estimated Tax Payment Receipts.
Along the same lines, many business owners have an opportunity during this time to get their books cleaned up for year-end planning and the upcoming filing season. Now is a good time to review your Accounts Receivable and Accounts Payable accounts for transactions that may be worth writing off; ensure bank reconciliations are up to date; review that loan payments are broken down between principal and interest; establish a plan for W-2 and 1099 filings; and plan and execute any year-end bonuses.
You’ll also want to take into account any deductions or tax law changes that may have taken effect in the past year.
Unfortunately, many of the expanded tax breaks are no longer available. For non-itemizers, there is no longer an additional $300 (Single) or $600 (Married Filing Jointly) charitable deduction like we had for the last two years. We also will no longer see the expanded child tax credit, expanded child and dependent care credit, or the special rules for the earned income credit that made taxpayers without a qualifying child previously eligible.
For business owners, the IRS introduced a mid-year mileage rate for the 2022 tax year. Business miles driven during the first half of the year are rated against the $0.585 deduction, while business miles driven on or after July 1st are rated against the $0.625 deduction.
Another major change to keep in mind— in 2023 tax year the bonus depreciation began its journey of being phased out over the next five years.
Sounds like a lot to wrangle, doesn’t it? That’s why it’s so important to have a partner in your corner to provide guidance, avoid hiccups, and make the whole process less nerve racking.
EHTC avidly works to stay ahead of deadlines and, in turn, can take extra care in addressing each clients’ specific tax situation. Our team places great value in transparent communication with our clients, so there are no surprises when it’s time to file.
We work hard all year round—and during this time in particular—to educate ourselves with the ever-changing industry standards, by participating in continuing education and internal conversations on a daily basis. This allows us to do our best work and provide our clients with the best service possible!
Have questions or need support? Reach out to your designated EHTC Accounting, Advisory, or Tax Services team—or, if you’re looking to add EHTC as a tax partner, contact us today!