2024 Tax Season Begins
Welcome to Saving Money with Andrew!
Tax season has begun! Tax prep is, unfortunately, a costly and time-consuming process for most Americans, with the average taxpayer taking 13 hours to file their taxes and spending $240 in the process. A few key questions to think about:
File now or wait?
Generally, if you have a very simple return and expect a refund, it’s good to file as soon as you have all the forms you need.[1] But, if your return is more complex (e.g., multiple sources of income, owning investment real estate or your own business), you may want to wait until March or early April in case you receive an amended tax form, such as a corrected Form W-2, 1099, or K-1.
What’s the best way to file?
This past year, ~92% of individual filers used a preparer (52%) or tax software (40%) to file electronically.[2] The days of paper forms are (far) in the past.
If your tax return is simple (wages from one or multiple jobs in one or two states, a basic investment portfolio, etc), you shouldn’t fear using tax software rather than going to a tax preparer.
Using software can save you significant money, easily $100-200, and most tax software makes the process easy. Plus, if you earn less than $79,000, the IRS Free File program offers free federal tax prep software, with some providers offering free state returns as well.
Is there anything I can do now to reduce my 2023 taxes?
Unfortunately, once the tax year ends, there is little you can do after the fact to save on the prior year. One exception is to make a 2023 IRA contribution, which you can do until April 15th, subject to relevant rules and contribution limits. Filers with incomes under $73,000 (for a married couple filing jointly) may even be eligible for the Savers’ Credit, which provides a tax credit for IRA contributions.[3]
And now, Andrew’s pick(s) of the week:
From Tooth Fairy Inflation Is Real: It’s Leaving $100 Bills and Louis Vuitton Bracelets:
A poll last year by Delta Dental, a large U.S. provider of benefits, pegged the average payout per lost tooth at a record $6.23, from $5.36 in 2022.
Also:
The Cost of Car Ownership Is Getting Painful. If you aren’t already, make sure you’re getting all available auto insurance discounts—we save about $450 every three years by taking a $25 online defensive driving course.
Chip by Chip, This Ice Cream Flavor Is Melting Away. I abandoned chocolate chip for cookies and cream long ago.
I hope this has been helpful. If you liked it, please share it on social media! Also, please send me your feedback, requests, and success stories.
[1] One reason is to get your refund as soon as possible. Another is to make it harder for a scammer to file a fraudulent return in your name (which is unfortunately very common).
[2] Source - IRS tax stats.
[3] And finally, this post is not meant to be tax advice! As always, consult your accountant (or, if eligible, the Volunteer Income Tax Assistance program) if you are unsure about anything about preparing your taxes.