The federal tax deadline is officially a month away for most filers, but experts say there are some important things to know this season.
As of March 1, the IRS had received about 54 million individual tax returns, less than 40% of the 146 million expected this season, according to the IRS.
The average refund amount so far has been $3,182, an increase of about 5% from the same period last year. Of course, the average can change as more returns flood in.
Personal Finance Details:
19 million people may be eligible for free tax preparation through the IRS this year
Trump vs. Biden: How a presidential election rematch will affect your taxes
Tax experts are bracing for a “big wave” of cryptocurrency taxes from the IRS.What investors need to know
April 15th is the federal deadline for most filers to file and pay taxes owed. However, parts of eight states affected by natural disasters have until June 17, IRS spokesman Eric Smith said.
“Additional time will be given automatically, meaning you don’t have to ask for it,” he said.
Here are three important things to know before the submission deadline:
1. There are several free tax payment options
Taxpayers have several free filing options this season, including the IRS Direct File Pilot Program, which opened fully to taxpayers in 12 states on Tuesday, the IRS This includes testing direct files.
You can also choose IRS Free File, a partnership between the IRS and a nonprofit coalition of eight software partners. In 2023, you can use Free File with an adjusted gross income of $79,000 or less (up from $73,000 in 2022).
Other free filing options include volunteer income tax assistance, tax counseling for seniors, MilTax, and software from private companies.
2. See if you can claim the credit that millions of people are “missing out on”
According to IRS Commissioner Danny Wuerffel, nearly 1 in 5 eligible taxpayers miss out on the Earned Income Tax Credit (EITC). The EITC is a tax cut for low- to moderate-income earners, and the average amount last season was $2,541.
“This is a lot of money,” he told reporters at a news conference in January, adding that millions of Americans “are simply falling through the cracks.”
For the 2023 tax year, the EITC is worth up to $7,430 per family with three or more children, up from $6,935 in 2022. Eligible workers between the ages of 25 and 64 who do not have eligible children can receive up to $600.
Some filers may also qualify for tax credits for car purchases and home energy improvements in 2023, the IRS said.
3. There’s still time to lower taxes
Cavan Images | Getty Images
John Lloyd, a certified financial planner and registered agent and owner of The Wealth Planner in Fort Worth, Texas, said that after Dec. 31, you can reduce your tax bill for the tax year or increase your refund. “You’ll have a much smaller toolbox of options,” he said. But there are still strategies you can employ.
One of your first options is usually to make pre-tax contributions to an individual retirement account, which may be deductible depending on your workplace plan participation and income. Similarly, you can receive a tax break by contributing to a spousal IRA.
The limit is $6,500 per account (plus $1,000 if you’re 50 or older) and is due until the 2023 tax deadline for contributions. Depending on your income, you may also qualify for a saver credit to contribute to your retirement savings. This can be up to 10%, 20% or 50% of the deposit amount.
And if you have a high-deductible health insurance plan, you still have time to contribute to your health savings account in 2023. HSAs offer three tax breaks: upfront deductions for qualified medical expenses, tax-free accretions, and tax-free withdrawals.
—CNBC’s Sharon Epperson contributed reporting.
