Opening Day of Tax Season 2023
Tax season officially starts today January 23rd with IRS processing tax returns today. Thanks Fox 2 Detroit for having me on. Not nearly as exciting as Tiger Baseball opening day, but still a big deal to all of us in the tax prep industry.
Employers have until January 31st to mail out your W2s and 1099s so patience if you haven't received them just yet. Or you can log onto your HR websites and they may already be posted there by now. You have until April 18th deadline to file your tax returns. About 90% of people efiled their tax returns last year. The tax return system gets more complicated each year as politicians write in new tax laws, so paper returns are difficult as you change a number on one page and it trickles through to other pages. Tax software makes it more accurate as it can run those computations throughout.
Most refunds take about 7-10 days to direct deposit into your checking account. However, if you are applying for the Earned Income Credit, or Advanced Child Tax Credit, the IRS must wait until mid February before they can disburse your refunds.
Reminder to see if you get the Retirement Savers Credit. When preparing your tax return, play around with the numbers and throw up to $7,000 into an IRA or Roth IRA to see how much tax savings you might qualify for. You have until April 18th to actually deposit funds into one of these accounts if it makes good sense for you specifically. The Retirement Savers Credit is like an IRS match up to 50% of your deposit. A simple suggestion is to just have your tax return direct deposited right into the IRA account. This is a great conversation for parents of kids in their 20s as they are in their lower earning years and more likely to qualify for this credit but don't have much liquid savings to take advantage of this perk. Parents could even offer to help cover part of the retirement deposit to help get your child off on the right foot towards financial independence and help take advantage of this tax credit and deduction.
Returns may be a little smaller this year for many. The pandemic brought us some one time tax incentives to help us all get through those tough economic times. Such as Parents receiving $3,000/child tax credit, which reverts back to the up to $2,000/child of prior years. Unemployment is taxable income again. There were no Economic Impact Payments for Covid relief in 2022 so no recovery rebates to be had on the tax return.
Some forms are still in development so you must wait to efile, such as large 30% tax credits to subsidize solar panels on rooftops and $7,500 for buying a new electric vehicle. Those tax laws were just updated in the SECURE 2.0 ACT signed into law on December 29th 2022 so the IRS and tax software companies don't have it finalized yet, probably by late February or early March if you have one of these situations.
For those of you with higher incomes and paying income taxes, as a fellow citizen, thank you! For those of you with lower incomes this year and not paying income taxes, please continue serving your community in the way you can best. Both are equally appreciated!