As the year comes to a close, there’s one important thing left to check off your list: your taxes. Tax season typically opens in late January when the IRS begins accepting and processing tax filings, and you generally have until April 15 to file, unless it falls on a holiday or weekend, giving you more time.
Mark Steber, chief tax officer at tax preparer Jackson Hewitt, advises getting a head start on your taxes to potentially receive your refund quicker. “Refunds were down a little last year due to waning pandemic benefits, but I think it has settled and may be up because of inflation adjustments,” Steber said.
Last year, the average tax refund by the April deadline was $2,753, down from the previous year’s $3,012, when pandemic-related benefits boosted refunds, according to the IRS.
The IRS makes annual inflation adjustments to many tax provisions, including tax brackets, standard deductions, and 401(k) and IRA contributions. For 2023, income thresholds for tax brackets were adjusted up by 7% due to soaring inflation, potentially pushing taxpayers into lower tax brackets with lower rates.
Standard deductions were also adjusted up by about 7%, meaning more of your income will escape tax. Increased contribution limits for 401(k) and IRAs will allow taxpayers to shield more income from taxes, providing potential benefits for individuals filing this year.
Three out of 4 taxpayers will likely receive a refund, making it the biggest incentive to file early. In addition, filing early can help lock down your information, give you more time to file an accurate return, and provide time to prepare finances in case you owe money.
While you can’t officially submit your taxes to the IRS until it’s ready to accept them, you can start preparing them as soon as you receive all your 2023 tax information from employers, banks, and other financial institutions. Tax preparers can put them in the queue to be automatically filed as soon as the IRS opens tax season, potentially putting you among the first to file and receive a refund.
In conclusion, preparing and filing your taxes early can have various benefits, including potentially receiving your refund more quickly. With the IRS making annual inflation adjustments and opening up tax season soon, it’s time to start gathering your tax information and getting ready to file.