Your 2023 Tax Season Prep List

By Rick Orford · March 10, 2022 · 6 minute read

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Your 2023 Tax Season Prep List

Tax season is a daunting task for nearly all of us, and while the 2022 tax season is already underway time is limited to ensure all the right documentation is included in your upcoming filing.

There is, of course, the option to use a professional tax service to make the process easier and more efficient. However, many people are choosing to improve their own general knowledge and understanding of the process, and tackling doing their taxes themselves.

With so much to understand, and a seemingly endless layer of complexities tied to both personal and business tax, we’ve compiled a 2022 tax guide check prep list you can follow to help guide you during your tax filing and to ensure you or your tax professional can get the most out of your tax returns.

Types of Taxes

Income Tax

The Federal government collects taxes from any business or individual that receives a regular monthly income. There are currently seven different tax brackets that divide individuals according to their annual earnings.

Property Tax

Taxes are paid on the assessed value of your home and property. Depending on the location of the property, amounts can vary. Additionally, there are also property gains taxes on imported items from foreign countries.

Payroll Tax

Employers who are withholding a percentage of an employee’s wages to fund Social Security Plans or Medicare will need to file payroll taxes. There is however a limit to the amount an employer can withhold based upon the annual wages of the employee.

Estate Tax

Also known as inheritance tax, individuals will need to review whether or not their local state government requires them to pay any inheritance or estate taxes. The federal government has no inheritance taxes, but on a state and local level, this can vary. One will also need to consider if the inheritance or estate is big enough to be subjected to taxes.

Capital Gains Tax

Both short-term and long-term investors will be subject to a percentage of taxes. Depending on the type of investment, and how certain stocks or investments are appreciated in value, capital gains tax applies to the increased value thereof.

Important information on paying taxes on stocks should be carefully considered, as some federal requirements may vary depending on the investment and dividends.

VAT Consumption Tax

U.S. consumers pay taxes on services and items which is known as sales tax. Vat consumption tax has been calculated as the final amount of a service or product throughout the supply chain. This means the amount added to the final sales price.

For more in-depth details on the different tax types, read the SoFi article What Are the Different Types of Taxes.

Types of Deductions

•   State and Local Taxes: Depending on the item, and purchase amount, you can deduct taxes paid on goods, services, and income on a state or local level.

•   Medical Expenses: If medical bills rose above 7.5% of gross annual income, these can be deducted.

•   Retirement and Investment Account Contributions: Depending on the type of account, IRA contributions are seen as deductible.

•   Mortgage & Property Taxes: Escrowed mortgage payments on property taxes can be deducted on IRS Form 1098.

•   Donations: Some types of donations made by individuals and businesses can be deducted.

•   Motor Vehicles: Individuals may be subject to deductions when they’ve purchased a new car, and have already been paying taxes on it. You can either deduct this from your income tax, or sales tax.

Tax Forms

Form W-2

Filed by an employer that’s withheld funds from an employee’s wages to fund additional plans such as Social Security.

Form 1099

Income tax form completed by freelancers, contract workers, income-earning stock investors, and any type of income received from a non-employer source like a side hustle or even royalties.

Form 1098

This form reflects the amounts an individual paid on a mortgage, or loan in one calendar year.

Filing Essentials

•   All personal information, including your social security number

•   Any previously filed tax returns

•   State returns, where applicable

•   Any tax efficient investments you may own

Investment Tax Categories

Taxable Investment Accounts

1.    Capital Gains

2.    Interest

3.    Dividends

Tax-deferred Retirement Accounts

1.    410(k)

2.    403(b)

3.    Traditional IRA

4.    SEP IRA

5.    Simple IRA

Tax-Exempt Retirement Accounts

These include taxable brokerage accounts.

1.    Roth IRA

2.    Roth 401(K)

3.    529 College Savings Plans

4.    Health Savings Accounts

Tax-Efficient Investments

1.    Non-dividend paying stocks

2.    ETFs

3.    Municipal Bonds

4.    Treasury Bonds

Student-related Taxes

Student Loans and Deductions

1.    American Opportunity Tax Credit

2.    Lifetime Learning Credit

3.    Student Loan Interest

Depending on the type of loan taken out, some student loans may be tax deductible.

Goods and other expenses

1.    Tuition & Meal Expenses

2.    Books & Supplies

3.    Home Office & Moving Expenses

Additional Retirement and Income contributions

1.    401(k) for employed students

2.    State and Local Deductions

3.    Medical Expenses

Tax deductions for students depend on various factors, but overall it’s important for both employed and unemployed students or young adults to still complete a successful tax return before the deadline.

Car Expense Deductions

Self-employed individuals and employers commonly use car expenses as a deduction on their tax returns.

Physical Car Expenses

1.    Gas, oil, tires, and repairs

2.    Depreciation of the vehicle

3.    Lease and Insurances

4.    Registration fees

Mileage Rate

•   Standard mileage rate per mile is 58 cents as of 2019.

•   This method should be used from the very first year the car is being used for the business.

•   When using a leased car, taxpayers should use the mileage rate used for the entire lease period.

Missed Deadline Penalties

There are various penalties involved when you do not file any tax returns, or miss the deadline. The IRS has procedures and regulations around missing any deadlines, and how penalties can impact future tax filings.

These penalties include:

1.    A $435 penalty for not filing a tax return as of 2020.

2.    A 5% levy on taxes owed per month for every month missed after the April 15th deadline for missing the tax deadline.

3.    A 0.5% levy on any taxes owed, if you fail to pay, even if you’ve filed before the initial deadline.

4.    A 25% penalty levy regulated by the IRS due to overdue taxes and filing.

The Takeaway

Depending on the type of tax filing you will be conducting, there are various implications to each. Taxpayers should be aware of the different types of forms they should complete before the deadline, and the different deductions they can include with their tax filing. Using a list or tax guide can help them prepare all the materials they need in advance.

Additionally, being prepared in advance to make any potential subsequent tax payments is important in order to avoid any hefty fines or penalties. Having an account such as SoFi Checking and Savings is a great way to keep on top of your finances and be prepared to manage any sudden expenses. A SoFi Checking and Savings account allows you to track your earnings, spendings and savings all in one place and gives a clear view of where you and your money stand.

Learn more about how SoFi Checking and Savings could give you a hand during tax time.

Photo credit: iStock/simpson33

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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