2023 Year End Recap -

According to the Internal Revenue Service (IRS), nearly 85 million taxpayers enlist professionals to prepare and submit their tax returns. If you’re among this group, ensuring your receipts, forms, and other relevant documents are well-organized well in advance of tax season is crucial.

Your tax preparer might gather information directly from you or provide you with a questionnaire to fill out. Regardless of the approach, being prepared in advance will streamline the process for you.

Here are steps to follow:

Compile all the yearly tax-related documents showcasing your taxable earnings and potential deductible costs, which should mostly be delivered by the close of January.
If you choose to itemize your deductions, ensure you gather and categorize all your receipts accordingly. However, if you opt for the standard deduction, there’s no need to keep track of individual receipts. For reference, 2023 standard deduction for Married Filing Jointly $27,700, Single, Married Filing Separately $13,850 and Head of Household $20,800.
Retrieve a copy of your previous year’s tax return for guidance.
Whether you’re working with a tax professional, utilizing tax software, or accessing resources from the IRS, they will provide the necessary tax forms essential for your tax filing.

1. Choose a Tax Preparer

If you decide to file with tax preparer and do not have one, a good way to find one is to ask friends and advisors for referrals. Be sure the person you choose has a preparer tax identification number (PTIN) showing they are authorized to prepare federal income tax returns.

Be sure to inquire about how much they charge in fees. This, of course, depends on the complexity of your return. Avoid using a firm that takes a percentage of your refund. The IRS website has tips for choosing a preparer and a link to the IRS directory of preparers, which you can search by credentials and location.

2. Schedule an Appointment

It’s beneficial to establish regular interactions, whether in person or over the phone, with your tax preparer throughout the year. Depending on your circumstances, this might mean quarterly meetings, biannual check-ins, or another suitable frequency. Think of it akin to visiting your doctor annually for a health assessment; your tax situation deserves similar attention and care. The sooner you talk with your preparer, the sooner you should be able to complete your return—even if you decide to file for an extension. If you anticipate a refund, you’ll get that sooner, too.

If you wait too long to schedule an appointment with a tax preparer, it might not happen before the filing deadline. That means you could miss out on opportunities to lower your tax bills, such as making a deductible contribution to an individual retirement account (IRA) or a health savings account (HSA).

3. Gather Your Documents

You should receive all the tax documents you need from your employer or employers as well as from banks, brokerage firms, and others with whom you do business by the end of January.Check that the information matches your own records on each form.

These are some of the most common forms:

Form W-2 if you had a job.
The various 1099 forms that report other income you received, such as dividends (Form 1099-DIV), interest (Form 1099-INT), and nonemployee compensation paid to independent contractors (Form 1099-MISC). Brokers aren’t required to mail Form 1099-B, which reports gains and losses on securities transactions, until mid-February, so those may come a little later.

Form 1098 for reporting any mortgage interest you paid.
Form W-2G if you had certain gambling winnings.
If you should be receiving your K-1 form, inquiry from the reporting partnership on the timeline receiving your K-1, as it might directly impact whether or not you need to file for extension.

The better organized your records are, the less time it will take a preparer to process your taxes, which translates into lower fees for their service.

4. Round Up Your Receipts

The receipts you’ll need to provide depend on whether you itemize your deductions or claim the standard deduction. You’ll want to choose whichever produces the bigger write-off, but the only way to know for sure is to add up your itemized deductions and compare the result with your standard deduction.

For the 2023 tax year, the standard deduction for single taxpayers is $13,850; for married couples filing jointly, it is $27,700.

Make sure you look for receipts for medical costs not covered by insurance or reimbursed by any other health plan (such as a flexible spending account (FSA)or an HSA), property taxes, and investment-related expenses. These are all subject to limits, but if they’re substantial enough, it may be worth your while to itemize.

If you itemize your deductions, you’ll also need to collect any backup you have for charitable contributions. For example, donations of $250 or more require a written acknowledgment from the charity stating the amount of your gift and that you did not receive anything (other than perhaps a token item) in return. If you don’t have such an acknowledgment, contact the charity and request it. You can find more details on charitable deductions in IRS Publication 1771.

Internal Revenue Service. “Publication 1771.”

If you have business income and expenses to report on Schedule C (for your pass-through entities reporting), you will need to share your books and records, such as QuickBooks or any other accounting system, receipts for expenses, and relevant bank and credit card statements.

5. List Your Personal Information

You probably know your Social Security number (SSN), but do you know the Social Security number of each dependent you claim? You’ll want to jot those down (in a safe place, of course), along with any other information your tax preparer is likely to need.

If you own a vacation home or rental property, for example, note the addresses. If you sold a property in the past year, note the dates you bought and sold it, the amount you originally paid for it, and how much you received from the sale.

6. Decide Whether to File for an Extension

If you need more time to complete all of these tasks, you can request an extension to October 15th for filing your tax return. However, you’ll still have to estimate the amount of tax you owe and pay that amount by the regular April deadline to avoid penalties and interest.

7. Plan Ahead for Any Refund

If you expect a tax refund, you have several options for how it’s handled.

You can apply some or all of the refund toward next year’s taxes. If you usually pay estimated taxes throughout the year, that can help cover the first quarterly installment.
The government can send you a paper check by mail or deposit the refund directly into your checking or savings account.
You can contribute some or all of your refund to certain types of accounts (IRAs, health savings accounts, education savings accounts) or buy U.S. savings bonds through TreasuryDirect.

You can also split your refund among the direct deposit choices by completing Form 8888.

You’ll need to let your tax preparer know what you want to do so they can indicate it on your return.

8. Find a Copy of Last Year’s Return

If you use the same preparer you used last year, they will likely have your previous information. If you use a new preparer, last year’s return can serve as a reminder to the preparer—and you—of some items you don’t want to overlook. Here are two examples:

Interest and dividends:Last year’s return should indicate which banks, mutual funds, and other financial institutions sent you 1099 forms. Use that list to make sure you received 1099s from them again this year (unless you closed those accounts or sold the investments in the meantime).
Charitable deductions: If you made small gifts, you might not have received any acknowledgment from the organization, but you can still deduct these contributions as long as you have a receipt, canceled check, or other proof. Consult last year’s list of organizations you donated to and see whether you made similar gifts this year. The list can also help you remember to make a donation this year to charities you usually support.

When Is the Deadline for Filing a Tax Return?

2023 tax returns are due on Monday, April 15, 2024.

You must file an extension by April 15, 2024, if you need more time to file your 2023 tax return. Remember – a tax extension gives you more time to submit your return, not to pay your taxes. Meaning, to avoid penalties and interest, you’ll need to pay your taxes by the regular filing deadline (April 15, 2024, for tax year 2023).

Key Takeaway

Whether you do your own taxes or hire someone else to handle the task, organizing your records in advance will save you time and, in the case of a paid preparer, money. The earlier you start, the more smoothly it should go, and the sooner you’ll have put the process behind you for another year.