Every tax season brings its own challenges. Here are key facts to help you navigate your filing this April.

Tax season is just around the corner, and it’s wise to start prepping early. If you've had any major life changes or made new purchases, such as an electric vehicle, you'll want to be informed. Here are ten crucial points to remember about federal income tax filing, due April 18, 2023.

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Payment App Reporting Delay

There’s been confusion regarding a new rule requiring payment apps like Venmo, Cash App, and PayPal to report income over $600. The IRS has decided to postpone this requirement for a year. For now, these apps must only report income exceeding $20,000 for this tax season. However, anyone earning money in the gig economy still needs to report their income to the IRS.

This extension gives the IRS and payment apps time to sort out how to handle various transactions—both business and personal. For instance, splitting a meal bill with friends shouldn't be considered income.

Expect Smaller Refunds

This tax season, you might receive a much lower refund. Some tax credits are reverting to their 2019 levels, as noted by the IRS.

Last year, you may have received $3,600 per dependent, but this year it could drop to $2,000. Taxpayers without children, who previously got $1,500 from the Earned Income Tax Credit, may now see only $500. Moreover, the Child and Dependent Care Credit will be capped at $2,100, down from $8,000.

Tax Credit for New Electric Vehicles

If you bought a new electric vehicle post-August 16, 2022, you might qualify for a tax credit, provided the final assembly occurred in North America. Check your Vehicle Identification Number (VIN) on the Department of Energy’s website to see if you're eligible.

If your purchase was before that date, consult the IRS or your tax preparer for eligibility details.

Hold Off on Filing

Filing your taxes early can feel satisfying. However, it’s crucial to ensure all your documents are in hand first, advises Justin Pritchard, a Certified Financial Planner. Some investment earnings reported on Form 1099 may arrive later than you expect.

“Starting your tax return early is fine,” Pritchard says, “but it’s best to wait until March to finalize and file.” Consider filing an extension now to give yourself more time. It’s quick, easy, and free.

Contributions for the Previous Year

If you didn’t contribute enough to your retirement or health savings accounts, you still have time, says Pritchard. Contributions to your HSA and IRA can be made until April for the previous tax year.

This might enable you to claim a deduction or contribute to a Roth IRA for potential tax-free income later. Check your eligibility before contributing.

Do You Need to File?

Not sure if you must file a return? The IRS has an online tool to assist: www.irs.gov/help/ita/do-i-need-to-file-a-tax-return.

Gather your filing status (single, married, widowed, etc.), federal income tax withheld, and basic information to determine your gross income.

Documents Required for 2023

Here’s what you’ll need to file your return, per the Taxpayer Advocate Service:

  • Social Security numbers or individual tax identification numbers for yourself and anyone on your return.
  • W-2s and 1099s for all income, including investments.
  • Documentation for tax credits and deductions (dependent care, homeownership, healthcare, education, etc.).
  • Last year’s adjusted gross income.
  • Bank account and routing numbers for direct deposit of any refund.

Itemize or Standard Deduction?

The standard deduction has increased significantly, making itemizing less essential than before, according to the Taxpayer Advocate Service. The standard deduction varies based on marital status, blindness, and other factors. Use this IRS tool to determine your standard deduction: www.irs.gov/help/ita/how-much-is-my-standard-deduction

Choosing the Right Tax Preparer

Anyone can prepare tax returns for a fee, as long as they have an IRS preparer identification code. However, their education and skill level can differ widely. Do your homework before hiring someone. Seek recommendations from friends and colleagues, and check online reviews. Once you find a potential candidate, verify their credentials here: www.irs.treasury.gov/rpo/rpo.jsf

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File Your Return for Free

If you’re comfortable tackling your return on your own, you can do it online:

  • If your gross annual income is $73,000 or less, you may qualify for free guided tax preparation on an IRS partner site.
  • If your income exceeds that, you can use the IRS’s free fillable forms to electronically enter your information onto a 1040 form, print it, and mail it.