Get ready for the 2023 tax season now with these steps
Planning ahead can save you money and headaches
Experts reveal how the tax code can be simplified
Grover Norquist, Steve Forbes and Steve Moore give their ideas on simplifying the tax code on 2022 Tax Day on 'Kudlow.'
The 2022 tax filing season is over, but experts say there are plenty of things taxpayers can do right now to get ahead of the game to save time, money and headaches when 2023 rolls around.
Ricky Lavina, co-founder of online accounting and filing service Taxfyle, says putting yourself in the best tax position involves planning early rather than waiting until the end of the year, and recommends several things folks can do to get on track.
There are several steps taxpayers can take right now to prepare for next year's filing season. (Scott Olson/Getty Images / Getty Images)
Make withholding adjustments, if needed
If there are any changes that have occurred since the start of the year, taxpayers will want to update their withholdings. For instance, if you had a new baby in January or later, you should update your W-4 to reflect that. "Depending on how many dependents you have, that could help out in terms of providing some better cash flow throughout the year," Lavina told FOX Business.
OWN ANY OF THESE INVESTMENTS? DON'T LET THESE TAX RULES SURPRISE YOU
Employees can reach out to their human resources department for assistance in updating their withholdings, and the Internal Revenue Service offers a tax withholding estimator to assist in making sure taxpayers are withholding the correct amount.
Document, document, document
Throughout the year, keep track of any deductions you will need to account for later such as mileage expenses, donations to charity, or business expenses, and allocate them. Lavina says, "If you don't record it, you don't know what you did, right?"
Rather than just keeping a stack of paper receipts, Lavina recommends either scanning or taking a picture of pertinent documents to store digitally for organization. He also notes that there are plenty of mileage tracking apps available that are easy to use.
Several apps are available to help with tracking mileage. (Photo By Liz Hafalia/The San Francisco Chronicle via Getty Images / Getty Images)
Track crypto trades
The IRS treats cryptocurrency like property for tax purposes, and traders of digital assets could owe taxes when they make a profit selling or exchanging those assets.
TAX ADVICE: CAN YOU CLAIM AN ELDERLY PARENT AS A DEPENDENT?
For crypto traders, especially those who do a high volume of trades, Lavina recommends implementing crypto tax software such as TokenTax, Cointracker, or Koinly to track trades. He says these services "make things infinitely easier" both for the taxpayer and for tax professionals assisting in filing a return.
Plan ahead for changes
If there are changes you anticipate this year that could impact your 2022 return, be sure to look at the tax implications, because they could impact your decision-making.
One example Lavina gave is that if you are considering purchasing an investment like a property to be rented out on Airbnb or Vrbo, be sure you know how many days you plan on renting it out to meet the IRS threshold.
The Internal Revenue Service (IRS) headquarters in Washington, D.C., U.S., on Friday, Feb. 25, 2022. (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)
For instance, if you buy a property that you live in on occasion but also rent out to others, there are limitations on the rental expenses you can deduct, according to IRS rules. However, if you are not using the property for personal use at all, it is treated as a business and you're able to deduct your full expenses.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Research now
Lavina says that regardless of a taxpayer's personal situation, taking their tax position seriously involves planning – and he recommends doing the research now rather than waiting until tax time rolls around again.