The 2023 tax year has closed and it’s now time to submit 2024 tax returns. As with a lot of things in life, it’s best to get a head start. There are several reasons why you should start to look into your financial activities for 2023.
Taxpayers who find time to organize tax records have a lower chance of missing the small but important details on their tax returns. This leads to less chance of receiving a notice or audit for a mistake. It can also prevent them from missing out on tax refunds and tax credits.
Taxes are deemed complicated by a lot of taxpayers. Individuals can have multiple sources of income and types of spending which can make them eligible for deductions. But if you start organizing your records early, there is almost no reason to worry. There is an abundance of resources online that can help make the tax process less complicated.
There are some steps taxpayers can take to ensure that they file their taxes on time and without mistakes.
The first thing to do is gather all your tax records, organize them, and ensure the required documents are ready. The specific requirements can vary depending on the nature of your income and deductions. For instance, if you want to claim itemized deductions, you need to file Schedule A.
An average taxpayer will be required to submit the following documents with their tax returns:
• Form W-2 statement from an employer for your income
• Form 1099 for other sources of income aside from employment
• Form 1099-INT for the interest you received
If you are someone whose work is under the gig economy, you will need to complete one of the following forms:
• Form W-2
• Form 1099-K
• Form 1099-MISC
Supporting documents are required for any of the forms completed for the taxpayer’s specific form of income. You should keep a copy of each document that you filed for a minimum of three years. The rules on taxes can also change which is why it’s important to keep yourself updated on any updates for the current year’s tax return filings.
There are taxpayers who did not receive the total amount or did not qualify completely for the third Economic Impact Payment. It may be possible for these taxpayers to claim the Recovery Rebate Credit. If they want to claim the credit, they must file the 2023 tax return.
Taxpayers should have the amount of the third Economic Impact Payments and Plus-Up payments received in order for them to claim the correct Recovery Rebate Credit amount. It is essential to double-check these numbers to prevent delays and get the refund faster.
If a taxpayer has claimed advance Child Tax Credit Payments the previous year, they can compare this with the Child Tax Credit amount they can claim in 2024. If they received less than the expected amount, they can claim the balance on the 2023 tax return.
However, if the case is the opposite, the taxpayer may be required to repay this year. In January this year, Form 6419 was released by the IRS which details the amount taxpayers received in 2023 Child Tax Credit payments.
Taxpayers may sometimes find that they were overpaid in refunds or they still owe taxes. If this happens, taxpayers can avoid a huge tax bill by making some adjustments to their withholding. If this is not done, it can result in a huge tax bill or taking home a paycheck with deductions if they go with a payment plan.
Situations in life change and these can require tax withholding adjustments. If you go through marriage or a divorce, you will probably need to adjust your tax withholding. Taking a second job, having a child, or starting a profit-earning activity can also require tax withholding adjustments.
