(Getty Images)
Chicago — So you're filing your tax return and you want to optimize your chances of getting a refund and reducing potential tax bills.
Don’t panic.
These three tips will take you far on your journey to a beefed up refund, reduced tax payments and lower stress levels.
Gather and organize tax documents to file an accurate return
According to the IRS, organizing your documents can be one of the most effective ways to avoid mistakes that lead to processing delays as you file your return.
Make sure to check in with each of your employees to get W-2 forms, if your employer hasn’t already sent them. The forms report wages paid to employees and the taxes withheld from them.Your employer must complete a W-2 form for every employee they pay a salary, wage, or other compensation to.
The IRS uses the forms to track your tax obligations. That means errors could lead to you having to pay the agency money you might not even owe so make sure as you’re filing your return that all your information is accurate. That’ll ensure you get your refund in a timely manner and could help you find overlooked deductions or credits.
Keep in mind the other forms you’ll need to file for your unique situation, such as a 1099 if you're earning income outside of your full-time job or form 1099-INT if you were paid interest.
It might be helpful to visit the IRS website to gain more insight into what other forms you’ll need to file. The IRS Interactive Tax Assistant could help you find answers to tax questions based on your specific circumstances. You can use it to determine if you must file a tax return, your filing status, if you can claim a dependent, if the type of income you have is taxable, if you’re eligible to claim a credit or if you can deduct expenses.
Check new rules on credits and reductions
According to Experian, tax credits and deductions can reduce your tax bill significantly or they can potentially increase your refund. Here are a few the company says to keep in mind:
Child tax credit: In 2022, the child tax credit is up to $2,000 per eligible child.
Child and dependent care credit: The child and dependent care credit credit topped out at $8,000 in 2021. In 2022, it has a maximum of $2,100.
Premium tax credit: If you purchased health insurance through the health insurance marketplace in 2022, the American Rescue Plan Act temporarily expanded eligibility for this credit by including taxpayers with household incomes above 400% of the federal poverty line.
Clean energy vehicle credit: Tax credits of up to $7,500 are still available for qualifying electric and plug-in hybrid vehicles, but eligibility rules changed with the passage of the Inflation Reduction Act in 2022. Check to make sure your vehicle purchase qualifies before claiming the credit.
Donations to charity: In 2021 only, charitable donations were deductible as a separate line item even if you took the standard deduction. This year, you'll have to itemize your deductions if you want to claim a deduction for charitable giving
File and pay on time
If you file your return late and pay late, you’ll face some pretty heavy fees. The IRS can charge you a penalty of 5% per month of the tax owed and a late-payment penalty of 0.5% a month of the tax due.The maximum late filing penalty is 25% and the late-payment penalty tops out at 25%.
If you can’t make the April 18 deadline, file form 4868 for an extension. Once you file it, you’ll have until Oct. 16 to gather, review and submit your tax documents. On the form, you need to make a reasonable estimate of your tax liability for 2022 and pay any balance due with your request.