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Tips For Tax Season

FaithFi: Faith & Finance | Mar 11, 2023

Show Notes

We’re hip-deep in tax season. Are you getting all your financial ducks in a row before it’s time to “give unto Caesar? The filing deadline will be here before you know it, so if you haven’t started prepping yet, now’s the time to do it. Rob West has some tips that could save you headaches. This is Faith and Finance - biblical wisdom for your financial decisions.

  • No one likes paying taxes, but it’s not only a civil mandate — it’s a biblical one, as well. Romans 13:7 tells us, “Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed.”
  • Of course, we don’t want to pay more in taxes than we have to, so we need to take steps to avoid that and make the process as simple and error-free as possible.
  • The first step is to get moving now. The earlier you file, the sooner the IRS will process your return. Analysts predict that even with more IRS employees on the job, new and confusing filing requirements will create a backlog, slowing your refund if you have one coming.
  • You can make the process go faster by setting up direct deposit with the IRS. Don’t procrastinate just because you think your return is simple, with maybe just one W-2 from your only employer and the standard deductions. And if that’s the case, file your return electronically. Mailing in a paper return will definitely slow things down.
  • If you have a more complicated return, it’s important to start gathering your information now. If you think you need help, you’ll want to hand over your documents to a tax professional and get the process started as soon as possible. That will give you more time to dig up any missing information and correct discrepancies.
  • Another step is to double check everything. Inaccuracies are a sure way to gain extra scrutiny by the IRS and possibly trigger an audit. Keep in mind that that agency computers will cross check the numbers on your return with W-2 and 1099 forms on file. If there are discrepancies, your return will get kicked out for a manual review and potential audit.
  • You can double check the numbers yourself by going to IRS.gov. Look for a link to “Get Your Tax Record.” You’ll get a free digital copy of your tax transcript. You may discover that you’re missing information that you need to file your return before the tax deadline, which by the way, is April 18th this year, so at least you have a few extra days.
  • If you know you can’t make the deadline, you can file for an extension. That will extend the time you have to file to October 16th. Now, that’s only an extension for filing, not an extension for paying. You may not know exactly how much you owe, but you’re required to make a good faith estimate and send that amount in by April 18th.
  • There’s an old joke that the only things certain in life are death and taxes. But they should add “changes to tax laws” to that. This year there are new rules for credits and deductions, so let’s go over some of them.
  • The child tax credit of up to $3,600 was partially doled out ahead of time in 2021 as part of COVID relief. That credit now returns to its original amount of $2,000 per child.
  • Again, due to COVID, the child and dependent care credit was increased to a maximum of $8000 in 2021. That now returns to its previous maximum of $2,100.
  • Another tax break gone “bye bye” is the separate donation to charity deduction. In 2021 you could claim those deductions on a separate line even if you took the standard deduction. But when filing your 2022 taxes, you’ll have to itemize to get a deduction for charitable giving.
  • It’s not entirely bad news - the clean energy vehicle credit remains at $7,500 if you bought a qualifying electric or plug-in hybrid vehicle in 2022.
  • If you receive payments by digital platforms like Venmo, CashApp or Paypal, you might have heard some buzz about IRS form 1099-K. The IRS planned to require those companies to report transactions of business account holders who received more than $600 in transactions in 2022. The previous threshold was $20,000, so this would have affected a lot of people this year.
  • However, a last minute change in the law has pushed that back to 2023, so you don’t have to deal with it this year. But make no mistake, you still have to report — and pay taxes on — income from self-employment and the sale of goods or other business transactions.
  • These are your tips for filing taxes this year. We hope they save you time, and maybe some money, too.

Next, Rob answers these questions at 800-525-7000 or via email at askrob@FaithFi.com:

  • Is there a way for you to use one son's 529 account to pay for another son's educational expenses?
  • Can you take a 529 lump sum and convert it into Roth IRAs for two children if only one is an account beneficiary?
  • Who do you go to for help if you and your wife have some bills you owe on, are trying to buy a house, and you want to avoid bankruptcy?
  • Should you take out mortgage protection insurance costing $30 a month if you have equity in your home and you have a 30 year mortgage at 2.2%?
  • Is it a good idea to continue working with a debt settlement company on consolidating four credit cards that you owe on? (Rob referred the caller to Christian Credit Counselors).
  • What factors should you consider when thinking about purchasing a vacation home if you are in your late 50s and have put aside long term savings for retirement?

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