Tax Prep Checklist for 2023

From gas prices to groceries, inflation was undoubtedly one of the biggest issues for Americans in 2022. 

2023 is officially here, and among all the excitement of the New Year is something a little less exciting — the start of another tax season. It can certainly be a stressful time, so to help you prepare before the April 18 deadline, we've created a checklist.

New for 2023

Many taxpayers are likely to receive a significantly smaller refund compared with the previous tax year as some tax credits return to 2019 levels. These changes include the amount for the Child Tax Credit (CTC), Earned Income Tax Credit (ETIC) and Child and Dependent Care Credit. Those who got $3,600 per dependent in 2021 for the CTC will, if eligible, get $2,000 for the 2022 tax year. For the EITC, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022. The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021. 

There will also be no above-the-line charitable deductions. During the COVID-19 Pandemic, taxpayers could take a $600 charitable donation tax deduction on their tax returns. However, in 2022, those who take a standard deduction may not take an above-the-line deduction for charitable donations.  

For the 2022 tax year more people may be eligible for the Premium Tax Credit (PTC) which is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace.  

There were also a number of changes to the eligibility rules to claim a tax credit for clean vehicles which you can review on the IRS website here.

What You'll Need

Most taxpayers will need the following to complete their taxes:

• Personal Information: This includes your full name, social security number, home address, date of birth, and copies of last year's federal and state tax returns. If you are married, you'll need all this information from your spouse as well. To streamline the process of receiving your return, we recommend having your bank account number and routing number ready to receive your refund through direct deposit.
• Dependent Information: For this, you'll need all of the information listed above from your dependents. You may also need Form 8332 showing that the child's custodial parent is releasing their right to claim a child to you if that is applicable to your situation.
• Sources of Income: Many of these forms won't be needed to file taxes every year. For example, you'll only need a 1099-G for years you have collected unemployment and a 1099-S is only for times you've sold property.
  • Employed income
    • W-2 forms for you and your spouse
  • Self-Employed income
    • 1099-K or 1099-NEC if you are self-employed or earning income as an independent contractor
  • Unemployed income
    • 1099-G for people receiving unemployment
  • Property/Rental income
    • 1099-S if you sold any property
    • 1099-MISC if you are receiving income from a rental property
  • Retirement income
    • SSA-1099 and 1099-R for Social Security benefits and retirement plan distributions
  • Investment income
    • 1099-B, 1099-DIV and 1099-INT for stock sales, dividends and interest
  • Other miscellaneous income
    • Schedule K-1 reports distributions from trusts and estates to beneficiaries
    • Amount of alimony received
    • Jury Duty pay
    • Any debt cancellation, scholarships, etc.
    • Cryptocurrency transaction records
    • Gambling winnings – a federal tax hit comes when your gambling winnings reach $600 or more
• Deductions:
  • Property Deductions
    • Form 1098 shows any mortgage interest, mortgage insurance premiums, and points you paid throughout the year
    • Real estate taxes
  • Income deductions
    • Local and state sales or income taxes
    • Business owners will need records of their business expenses
  • Other miscellaneous deductions
    • Out-of-pocket medical expenses
    • Charitable donations
    • Childcare expenses
    • Education expenses — this includes what teachers have paid for classroom supplies
      • You'll need Form 1098-E if you paid any student loan interest
      • Form 1098-T is for higher education expenses
    • Alimony paid
    • Contributions to retirement plans

Filling Your Taxes

Now that you know what you'll need to file your taxes, it's time to figure out how you'll be filing them. There are a number of free programs that help eligible residents file their tax returns. The IRS sponsors multiple programs through two initiatives: Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). You can also go directly to IRS Free File, which lets you prepare and file your taxes for free. If you qualify, there are several no-cost programs sponsored by the IRS, available locally for Philadelphians.

• Campaign for Working Families (CWF): This national organization, with a branch in Philadelphia, offers free IRS-certified tax preparation for families & individuals earning less than $65,000 per year. Virtual, drop-off, and in-person options are available, and they are scheduling appointments now.
• Ceiba: A Philadelphia-based nonprofit whose goal is to improve the financial well-being of Philadelphia's Latino community, including providing free resources (in Spanish and English) to help families file their state and federal taxes.
• AARP Foundation's Tax-Aide Program: You don't have to be an AARP member to utilize this program. It's available to help those over the age of 50 get a handle on their tax questions with the assistance of IRS-trained and -certified volunteers, who have up-to-date knowledge about yearly changes to the tax code.

If you are not eligible for any of these programs, the IRS has a directory of certified tax return preparers you can search for in your area. Using a tax preparer can give you peace of mind knowing your taxes have been filed by a professional that thoroughly understands the tax code.

Something to Look for in 2024

It's doesn't hurt to start getting organized for next year's tax season well ahead of time. A big change that will go into effect for filing in 2024 that was originally slated to be implemented in 2023, are the altered requirements for filing Form 1099-K. This form is used to report income from PayPal, Venmo, and other third-party network payments. In the past, the only people that needed to file a 1099-K were those who made more than 200 transactions worth above $20,000. Congress has greatly reduced that threshold as part of the American Rescue Plan Act of 2021. Now a single transaction on one of the third-party payment networks of over $600 can trigger the form. As a result of this, there was a possibility you could receive a 1099-K for personal transfers by mistake, which is a big reason why they delayed implementation a year to help straighten out the confusion. The IRS has said the reporting change does not apply to personal transfers, such as reimbursements or gifts between family and friends. While you will not have to worry about it for this tax season, if this change applies to you, make sure you familiarize yourself with the new requirements for next year.

With the deadline still more than three months away there is plenty of time to get organized and ready to file your tax return to properly. Getting a jump on it now will help you avoid the last-minute scrambling and stress that the deadline can bring.