IRS Issues Alert on 5 Tax Steps to Take Now
The agency released a set of important reminders, including filing changes and improvements.
The end of one year and the beginning of a new one comes with plenty of cherished traditions—but it also means it's time to finalize your tax filing. Getting an early start ahead of the April 15 deadline can be an excellent way to help ensure you've included all necessary information and that you haven't made any mistakes that could lead to fees or penalties. But whether you're just getting started or waiting to put the finishing touches on your filing, you might want to consider an alert the Internal Revenue Service (IRS) just issued with some tax steps to take now. Read on to see what you need to know while preparing to pay your share.
Prepare for your last quarterly payment.
While many people who are full-time employees see taxes pulled from their paycheck throughout the year, some workers who are self-employed, freelance, or generate income in other ways pay quarterly installments. And even though final filings aren't due until April, taxpayers who make these partial payments should have another date circled on their calendar.
According to a Dec. 11 press release from the IRS, the last quarterly payment for the 2023 tax year is due on Jan. 16, 2024. The agency points out that besides freelancers and anyone who earns an income from side jobs, this could also include people who make money on annuities, digital assets, or other means.
Anyone unsure of what they may owe can also use the IRS' Tax Withholding Estimator to calculate any potential due payments. Doing so can also help avoid paying extra in late payment fees and interest, which havemore than doubled to 8 percent over the past two years in the face of inflation, The Wall Street Journal recently reported.
"It's a cautionary tale for individuals to think about as we get toward year-end," Joseph Doerrer, a New Jersey-based certified public accountant (CPA) and certified financial planner, told The Journal. "Are you where you should be?"
Set up your online account with the IRS.
Some people rely solely on the simplicity of traditional mail to get the documents and alerts they need from the IRS. But if you're looking to save time, you might want to consider using some of the digital tools at your disposal.
In its alert, the IRS reminds taxpayers that signing up for an online account with the agency can make filing easier by putting plenty of information right at your fingertips. The service allows you to view any taxes owed, check payment history, schedule payments, request tax transcripts, research and apply for payment plans, check for some notices, and validate bank accounts for quick payment. Those using an accountant or other assistant to file their taxes can also use the site to grant them access.
Start organizing your documents.
For many taxpayers, filing with the IRS usually requires getting all the necessary information together. After all, sending in anything incomplete can result in delays for those much-coveted refunds.
Since they'll be arriving soon, the agency suggests coming up with a way to organize important year-end documents like a W-2 and the various 1099 forms. Ideally, taxpayers should keep them all in one place as they receive them—which can also include scanning and downloading documents so they can be stored securely and sent digitally.
If you're really looking to get organized, the best option is often to set up a new filing folder in January ahead of the following tax year instead of after the last one has ended. "That doesn't start only on the day you file your return," Mark Steber, chief tax information officer at tax preparation company Jackson Hewitt, told Apartment Therapy. "It should be a year-round practice."
Sign up for direct deposit.
If there's any silver lining to paying your taxes, it's that there's sometimes a refund available. But if you're looking to get yours back as quickly as possible, there are a few things you should do ahead of time to speed it along.
The agency's press release suggests that anyone looking to see some money back early should file electronically using direct deposit. Rather than a paper check sent through the mail, this method allows taxpayers to receive their funds quickly and securely. According to the agency, eight out of 10 taxpayers use this option—and more than nine out of 10 receive their refunds in less than 21 days.
Some experts agree that it can be a huge time saver. "Always choose to e-file if possible," Moira Corcoran, CPA, finance expert with JustAnswer, previously told Best Life. "The IRS is still behind on paper returns from COVID, and it is taking up to two years to process. If you would like your refund ASAP, e-filing is the way to go!"
Look into new possible tax credits.
Besides deductions, tax credits are one way to lower the amount you owe the IRS if you are eligible. And like some other rules and policies, the constant addition of new potential credits is worth staying on top of to see if you qualify.
Now, the IRS is reminding some taxpayers to look into two new energy-related tax credits before their upcoming filing. The first applies to anyone who may have purchased new electric vehicles in 2022 or new clean vehicles in 2023 or later. The agency points out that recent changes could mean their purchase qualifies.
The other refers to anyone who may have made energy use improvements to their homes. According to the IRS, some qualifying changes could include things like certain exterior doors, windows, skylights, or insulation improvements to your primary resident, as well as approved upgrades to central air conditioning systems, water heaters, furnaces, boilers, and heat pumps.
However, it's important not to go overboard by claiming too much with other credits. Recently, the IRS issued a warning that it had issued 20,000 disallowances for the Employee Retention Credit (ERC), which was enacted during the COVID-19 pandemic to help some small businesses cover payroll during shutdowns and other interruptions. The agency cited an investigation that uncovered widespread abuses for its decision, adding that the problem may have been worse by third-party companies pushing small businesses to claim the ERC before charging them for their services.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.
- Source: Get ready to file in 2024: What’s new and what to consider
- Source: Tax Withholding Estimator
- Source: Your Online Account
- Source: Get Your Refund Faster: Tell IRS to Direct Deposit your Refund to One, Two, or Three Accounts
- Source: Credits for New Electric Vehicles Purchased in 2022 or Before
- Source: Home energy tax credits
- Source: IRS expands work on aggressive Employee Retention Credit claims; 20,000 disallowance letters being mailed, more action and voluntary disclosure program coming