5 Ways To Maximize Your Tax Return in 2023
Tax Day is April 18 again this year, but Americans are eager to put their returns behind them and cash in their refunds early. A new GOBankingRates study of more than 1,000 adults shows that nearly seven out of 10 people plan to file their taxes long before the official deadline.
That’s a positive trend, but it’s more important to get it done right than to get it done early — especially if the choice is between getting your refund quickly and getting your refund in full.
If you’re eager to rip off the bandaid, you’re hardly alone. About 15% of people would rather sit through jury duty than do their taxes. Another 11% would rather have a root canal and nearly 9% would rather spend a night in jail.
Although no one could blame you for wanting to get it over with, you need to focus on getting your filing right. Here’s how to maximize your refund.
Cross Your T’s and Dot Your I’s
The thing you have the most control over when filing your taxes is the ability to prevent costly unforced errors, which you can do in most cases by concentrating, being meticulous and reviewing your work with a critical eye.
“To maximize your tax refund this year, I recommend taxpayers double-check their information before submitting their returns,” said 30-year industry veteran Dana Ronald, CEO of Tax Crisis Institute.
The most common mistakes are usually those that are easiest to avoid — things like failing to double-check bank account and routing numbers or even your own address can cost you time and inconvenience even if they don’t cost you money.
“Even minor errors, such as incorrect Social Security numbers or misspelled names, can lead to delays in processing,” Ronald said.
More significant errors, like underreporting income or improperly claiming deductions or credits, can shrink your refund or even incur IRS penalties — and people seem to be aware of the potential consequences. Around 1 in 4 of the survey’s respondents worry about making a mistake on a form, which is more than any other tax season concern. Luckily, the solution in most cases is an extra dose of diligence.
Rethink Your Filing Status
Few things have more influence over the size of your refund than your filing status, and most people pick joint or single based purely on whether or not they’re married — but it’s worth further contemplation considering the stakes.
Depending on your situation, you could leave a lot of money on the table by choosing your filing status without thinking.
“Generally, couples decide to file joint returns,” said Wayne Bechtol, senior tax accountant and board advisor at financial services provider Fiona. “However, filing individual returns can be beneficial at times. For instance, the individual computation can prove beneficial if one of the spouses has incurred substantial medical expenses or COBRA payments due to a job loss, etc. Similarly, they can avail of the Child Tax Credit benefits if they file individually. At the same time, unmarried taxpayers can file their returns as the head of the household and enjoy higher standard deductions.”
Know Your Deductions
Just like filing status, many taxpayers choose the standard deduction without putting much thought into the alternative. That’s because the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, which has since grown to $25,900 for joint filers or $12,950 for individuals — a fact that fewer than 10% of the study’s respondents knew.
Taking the standard deduction is the simplest and easiest option, but it’s worth finding out if itemizing will give you more bang for your buck.
“Deductions like state sales tax, out-of-pocket charitable contributions, student loan interest, and child/dependent care can help reduce your tax liability and enhance refunds,” Bechtol said. “You should know these aspects properly and use them to your benefit.”
If the whole thing confuses you, you’re in good company — a large majority of the study’s respondents cited either credits or deductions as the thing they understand least about doing their taxes.
Maximize Contributions to Tax-Advantaged Accounts
Contributions to after-tax Roth IRAs are not tax deductible, but you might be able to write off some of the money that you put into certain pretax accounts, like traditional IRAs and health savings accounts. Even better, you have until the filing deadline to make contributions to those accounts for the previous year, even if you haven’t yet opened an account.
“Maximizing your IRA and HSA contributions can help prepare your tax returns accurately and ensure higher refunds,” Bechtol said. “For example, traditional IRA contributions can help reduce your taxable income and maximize refunds. Similarly, pre-tax contributions to your HSA account can reduce your taxable income.”
Invest In the Help You Need
Tax software, even the free versions, has improved dramatically over the last few years. In most cases, common options like TurboTax and TaxSlayer are intuitive and accurate — nearly half of the study’s respondents will use a similar software program to file this year.
But there’s still no substitute for an experienced professional. If your situation is especially complicated, or if you’re unsure of how certain rules apply to you, an investment in the services of a CPA, tax attorney or another industry pro could pay for itself and then some.
“I suggest you consult a qualified tax expert who can help you get the maximum benefits and maximize your refunds,” Bechtol said.
This is especially true for self-proprietors, business owners and other people who work for themselves.
“If you’re a self-employed taxpayer, I recommend consulting with a tax expert to ensure you take advantage of all available deductions and credits,” Ronald said.
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Methdology: GOBankingRates surveyed 1,002 Americans aged 18 and older from across the country on between January 30 and February 1, 2023, asking fourteen different questions: (1) How do you plan on filing your taxes for this year?; (2) When do you expect to file your taxes this year?; (3) How much do you expect to receive in a tax refund?; (4) What do you plan to do with your refund?; (5) Do you feel confident you are receiving all the deductions you feel qualified for?; (6) Do you believe your tax dollars are being spent effectively?; (7) Do you believe you are paying too much, too little, or a fair share in taxes?; (8) Have you ever been audited before?; (9) Who will/would use your tax dollars the best?; (10) How much is the standard deduction for a single filer (and married filers) in 2023?; (11) What concerns you the most about Tax Day?; (12) Do you expect your tax refund this year to be more or less than last year?; (13) What do you understand the least about your taxes?; and (14) What would you rather be doing than your taxes? (Select all that apply). GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
