It's Tax Season: Here's What You Need to Know

When is tax season? Important tax dates to know in 2023

Tax season can be a stressful time.

Below are some key federal tax dates to keep in mind for 2023. We put these deadlines up top so that you can plan accordingly and avoid any surprises. Starting your taxes early can save you from the stress of having to scramble at the last minute and the risk of having to pay penalties for missing deadlines.

A refresher on tax basics: federal income tax brackets, deductions and credits

During tax season, you’ll likely hear terms like “tax brackets,” “deductions” and “credits.” And it’s because all three affect your tax liability – in other words, the amount of taxes you owe to the federal government in a given tax year.

Federal income tax brackets

At some point in your life, you might be asked which tax bracket you’re in. Your tax bracket, also known as your “marginal tax rate,” is based on your income and filing status (e.g., single, married filing jointly, etc.). It helps to determine the amount of taxes you owe each year.

There are seven federal tax brackets, or rates, 10%, 12%, 22%, 24%, 32%, 35%, 37%. The amount of your tax bill is calculated, in part, by applying these rates to your annual taxable income.

US federal tax rates are progressive. That means the higher your taxable income, the higher your tax rates will be.

To figure out which bracket you’re in, consult the IRS federal income tax table.

For example, a single filer with a taxable income of $32,000 in 2022 is in the 12% bracket.

But just because a taxpayer falls into the 12% bracket doesn’t mean that their entire taxable income is taxed at 12%. This is a common misunderstanding. Many people don’t realize that different portions of your taxable income are taxed at different rates based on the federal tax bracket table.

Heads up, we’re about to do some math.

So sticking with the example of a single filer with $32,000 in taxable income. For the 2022 tax year, the first $11,000 of that taxable income would be taxed at 10%. The remaining $21,000 ($32,000 - $11,000) would be taxed at 12%.

Preparing your federal tax return

Getting a tax refund?

If you’re getting a refund this year, hooray! Because not everyone gets a refund from the government.

Sure, you could buy yourself something nice with that extra cash. But how about really treating yourself (and future self) by putting that money away in your savings or retirement accounts? We have some ideas on how to put that money to work:

1. Maximize your contribution to your 401(k) or IRA
2. Open a CD account and put a CD strategy in play
3. Open a high-yield savings account
4. Invest your refund
5. Pay down your debt

Where’s my tax refund?

The IRS usually issues refunds in less than 21 days. But remember: The refund process could take longer for a number of reasons – for instance, if the return was incomplete or contained significant errors.

If you’re hankering for a status update though, you can use the IRS refund tracker. To use the tool, you need your Social Security number (or individual taxpayer identification number), filing status and exact refund amount.

Keeping tax records

While you’re waiting for your refund, it’s a good time to reorganize the tax documents and forms you’ve used for the tax season. We joked about the shoebox filing system earlier, but if this is you, there’s no time like the present to start a new organization system.

No matter which organization method you use, the goal is to be able to find the documents you need quickly and easily. This is in case you ever need to:

• Respond to IRS questions or audit
• Amend a tax return
• Prepare for next year’s return
• Provide tax information for certain applications (e.g., home loan, financial aid, etc.)

Another important thing to keep in mind is to store your records in a safe and secure place.

Amending a federal tax return

As you’re putting your tax documents away, you might realize you made a mistake on your return. Don’t panic.

Generally, if you need to go back and claim a credit or refund, you have up to three years from the original filing date to make any necessary corrections by submitting an amended tax return. US tax laws are complicated, so mistakes can totally happen (and they do!). So don’t beat yourself over it.

First, use the IRS Interactive Tax Assistant tool to see if you even need to file an amendment. That’s because if it’s a simple math error, you probably won’t need to file an amended return. The IRS usually corrects minor mathematical and clerical errors for you.

That said, here are some common reasons why you may need to file an amended return: Changes or corrections to your filing status , income, credits, deductions or number of dependents. If you do need to file an amended return, fill out and submit IRS Form 1040X.

IRS audits

IRS audits are the bogeymen of tax season. The dread is understandable given how audits are typically depicted in popular culture. Take a deep breath. Here are the most important things you need to know about audits:

• IRS audits are not as scary as you might think. They’re the IRS way of double checking your returns.
• Not every audit requires sitting across the table with someone from the IRS – some audits are conducted by mail.
• You can challenge IRS audit findings.
  

Congratulations! You’ve reached the end of our article. Hopefully at this point, tax talk no longer sounds like a foreign language. Our goal is to equip you with some basic tax knowledge, so that you can get your bearings and start the tax season with confidence.

Bear in mind that taxes are complicated, and tax laws are always subject to change. Your best source of information on the latest tax rules is the IRS or a certified tax professional.