5 Things to Know As You Begin Filing Season
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This is an excerpt from the Personal Finance team’s weekly Twitter space, “This Week, Your Wallet.” watch the latest episode hereand tune in every Friday at 11 am ET.
tax season expelled January 23. The IRS expects taxpayers file more than 168 million returns, most before the April 18 deadline.
Here are some key things to know before applying, according to CNBC Sharon Epsonsenior personal finance correspondent, and kate dorea personal finance reporter.
1. Filing, and tax help, can be free
Certain taxpayers can take advantage of free (and often underused) resources when filing a return.
He IRS Free File The program offers free online guided tax preparation. The program, delivered through a public-private partnership, is available to taxpayers with a adjusted gross income of $73,000 or less.
Free File is available to 70% of taxpayers, but few use it — and may inadvertently pay to file a return.
The IRS also offers fillable forms, which are electronic federal tax forms that you can fill out and file online for free. It’s essentially a pen-and-paper option for DIYers.
You may also be eligible for free tax help at a local Volunteer Income Tax Assistance Center, generally available to people making $60,000 or less, people with disabilities, or people with limited English proficiency. Those 60 and older can also get help through Tax Advice for Seniors.
You can locate a nearby VITA or TCE site at the IRS website.
2. When to file a tax return
In most cases, you should apply as soon as possible to get a refund faster and to reduce the chances that a scammer will claim a refund on your behalf through identity theft.
However, you need all relevant tax forms to archive, and they may not all be available yet. You can use last year’s tax return to get an idea of what forms you may need. They may be mailed to you or available online. (In addition to tax forms, make sure you have receipts for any relevant tax deductions and credits on hand.)
If you owe a tax bill, and you’re worried you won’t have the money to pay right now, you can delay filing a return, usually until April 18. At that time, file a plea and pay at least a portion of your bill to reduce penalties.
3. Timing and amount of tax refunds
In general, you should receive a refund within 21 days.
A avoid delays, file an error-free electronic tax return with direct deposit for payments. Do not submit a paper return or request a refund check.
Double check your return for key details and basic errors, such as typos in your name, address, date of birth, bank details, and Social Security number. Errors can delay refunds.
The IRS has warned that tax refunds can be smaller this year. Pandemic-era tax relief, such as enhancements to the Child Tax Credit, Child and Dependent Care Credit, and Earned Income Tax Credit, are no longer available.
4. What to do with a tax refund
It may be wise to save, rather than spend, your refund this year. Having a bigger financial cushion is important in an environment of economic uncertainty.
Taxpayers can earn about 3% to 4% of that cash through an online bank that offers a high-yield savings account. They may also want to contribute to a Roth or pre-tax individual retirement account.
5. Smoother customer service
Those with tax questions may experience smoother IRS customer service this year compared to the recent past.
The Inflation Reduction Act boosted funding for the agency, which has begun implementing changes like the hiring of 5,000 new customer service representatives and new technology that allows people to respond to some online ads.
Last year, only 13% of callers got through to a representative. The IRS hopes to reduce the phone wait time to 15 minutes.