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This is an excerpt from the Personal Finance Team’s weekly Twitter site, “This Week, Your Wallet.” Check out the latest episode Hereand tune in every Friday at 11:00 ET.
Tax season began on January 23. The IRS expects taxpayers to file more than 168 million returns, mostly before the April 18 deadline.
Here are some key things to know before applying, according to CNBC’s Sharon Epperson, senior personal finance correspondent, and Kate Dore, a personal finance reporter.
1. Filing – and tax help – can be free
Some taxpayers can leverage free (and often little-used) resources when filing a return.
Free file is available to 70% of taxpayers, but few use it – and they may inadvertently pay for a refund.
The IRS also offers fillable forms, which are electronic federal tax forms you can fill out and file online for free. It’s essentially a pencil-and-paper do-it-yourself option.
You may also be eligible for free tax help at a local volunteer income tax assistance center, generally available to people who earn $60,000 or less, people with disabilities or those with limited English. Those 60 and older can also get help through tax counseling for the elderly.
You can find a nearby VITA or TCE site on the IRS website.
2. When to file a tax return
In most cases, you should file as soon as possible—to get a faster refund and reduce the chances of a fraudster claiming a refund on your behalf through Identity theft.
However, you need all the relevant tax forms to file, and they may not all be available yet. You can use last year’s tax return to get a sense of what forms you may need. They may be mailed to you or available online. (In addition to tax forms, be sure to have receipts handy for relevant tax deductions and credits.)
If you owe a tax bill — and you’re worried you don’t have the money to pay right now — you can delay filing a return, generally until April 18. At this point, file a return and pay at least part of your return. Bill to reduce penalties.
3. Timing and amount of tax refunds
Generally, you should receive a refund within 21 days.
Double check your return for key details and basic mistakes such as typos in your name, address, date of birth, banking details and social security number. Mistakes can delay refunds.
The IRS has warned that tax refunds could be smaller this year. Pandemic-era tax relief — like improvements to the Child Tax Credit, Child and Dependent Care Credit and Earned Income Tax Credit — are no longer available.
4. What to do with a tax refund
It may be wise to save—and not spend—your refund this year. Having a bigger financial cushion is important in an environment of Economic uncertainty.
Taxpayers can earn approximately 3% to 4% on the money through an online bank that offers a high-yield savings account. They may also wish to contribute to a pre-tax or Roth individual retirement account.
5. Smoother customer service
Those with tax questions may experience smoother IRS customer service this year relative to the recent past.
The Inflation Reduction Act strengthened the funding for the agency, which had begun Rolling changes like hiring 5,000 new customer service reps and new technology that allows people to respond to some notices online.
Last year, only 13% of people who called reached a representative. The IRS hopes to bring the phone wait time to 15 minutes.
