Easing Your 2023 Tax Stress
Procrastinating on those taxes? You're not alone: 31% of Americans admit to waiting until the last minute to file. On top of that, 69% of Americans don't know that Tax Day is on April 18th this year.
For many of us, tax preparation is likely (and understandably) not a favorite pastime. Still, like many other things we avoid in life, tax procrastination and anxiety likely stem from the unknown and not understanding the system.
Let's untangle some of our tax uncertainties the TRN way and look at the facts.
It's Complicated: Our Messy Relationship With Tax Season
Tax preparation can feel like a massive undertaking, especially if you're down to the wire. Worst case scenario: you miss the deadline, owe back taxes, or may be subject to an audit by the IRS. But since there's no outrunning it, it's better to face the next steps and get back on track with a plan.
If you ran too close to the deadline or lost that copy of your W-2, file an extension and get reorganized. For more information on how to file an extension for your 2022 taxes, visit the IRS website here.
Every year, countless Americans set up short or long-term installment plans with the IRS; and most of the time, these are relatively straightforward agreements to set up. If you owe back taxes or want information on payment installment plans, here are some additional tips.
Received a notice from the IRS that you're being audited? Whether due to a simple math error or incomplete income reporting, it happens almost four times out of every 1,000 returns.
Going Pro: When to Move on From DIY Tax Preparation
Thinking of avoiding the tax time stress altogether by hiring a pro? We asked Destin Cobb, Partner and CPA with Carr, Riggs, & Ingram, for his take on when to think about seeking a professional tax preparer.
If you're a single earner with no dependents, one W-2 per year, and a few other financial complications to consider, your best bet may be to continue filing yourself for the time being. But as your financial landscape evolves, here are some signs you may want to consider hiring a professional to assist you:
You're self-employed, a business owner, a gig worker, a freelancer, or have multiple income sources outside of W-2 employment
You own rental properties
You hold significant assets or will need to make multiple itemized deductions
You've received an inheritance, cashed out a retirement account, had a baby, divorced, sold property, made a significant charitable contribution, or other major life changes that could affect your finances or income
You need to file income tax returns in more than one state
You invest heavily in Cryptocurrency
You've received notice from the IRS that you're going to be audited
You really, really hate doing your taxes, have trouble setting aside the time for it, or are prone to making errors when attempting to do them yourself
DIY vs. ROI
Just because you can do your taxes doesn't mean you have to. A qualified tax preparer can help you understand which deductions you're eligible for, knows how to calculate applicable expenses, and keeps relevant regulations or tax code changes at their fingertips. Hiring a pro could be well worth the cost and a better return on your investment if your time is better spent on other activities, especially income-producing ones.
"There's definitely a tipping point when it comes to filing your own returns" – Destin Cobb,CPA
Destin expands on that by saying, "There's a point when you may need to shift your mindset from just saving money or just saving on your taxes toward the strategies and long-term planning for the quality of life you want down the road."
Seek Tailored Services
And just as we all have different financial goals, there's no one-size-fits-all plan for your financial portfolio. Your tax and investment strategies should be tailored to you and the future you want to build. Whether you need an accountant well-versed in crypto, international commerce, or the gig economy, feel free to seek a specialist or ask plenty of questions.
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Avoid Tax Season Scams
Whether or not you work with an experienced accountant on your taxes, protecting yourself from tax fraud and scams is critical. In 2022, Americans reported nearly 7.8 million instances of suspicious activity related to tax filings or identity theft to the IRS. Some common tactics involve scammers posing as the IRS or as legitimate tax preparers. Read on for more information and ensure that your personal information is protected.
Scammers are getting better and more convincing than ever, rattling off badge numbers and maybe even name-dropping your local law enforcement agencies in their threats. The U.S. Department of Justice reminds us that the IRS does not discuss your personal or business tax issues via:
Generally speaking, whether it's regarding an audit, error, overdue tax bill, or other issues, the IRS will typically try to reach you by mail first. IRS employees may call to schedule an appointment or further discuss an audit with you, but only after attempting to send notice by mail first, often more than once.
Further, a legitimate IRS agent will not demand immediate payment, especially in the form of gift cards, prepaid debit cards, or wire transfers. For more information on IRS impersonation scams and how to report them, visit the IRS website.
Tax Preparer Scams
Another common seasonal scam comes in the form of tax preparer fraud. In this scenario, scammers pose as tax preparers to intercept your tax refund, file for a refund without your authorization, or even steal your entire identity.
Scammers may target taxpayers with legitimate-looking phishing campaigns or convincing websites. "The site looks real," warns the Federal Trade Commission (FTC). "But it's set up to collect personal information that can be used to commit fraud, even identity theft."
Tax preparer red flags include:
Accepting payment only in the form of cash, prepaid debit cards, or gift cards
Asking you to sign blank or unfinished tax forms
Refusing to provide a Preparer Taxpayer Identification Number (PTIN)
Just as you would when hiring any professional, do your homework when hiring a tax preparer, which could include verifying their license and qualifications, searching for online reviews, or in this case, verifying their listing in the IRS directory of qualified tax preparers.
Destin Cobb is a CPA and Partner at Carr, Riggs, and Ingram CPAs and Advisors (CRI). CRI is a Top 25 nationally ranked firm offering full-service, innovative consulting and advisory services to clients in all 50 states. He has over 18 years of experience and serves on several local boards. Destin enjoys permaculture gardening, river fishing, or folk music when he's not working.
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