Tax filing season officially began on Monday, January 23rd. Not many people file that early, but for some taxpayers it makes sense to do so. Here are common reasons to consider trying to be at the head of the line:

• You want to avoid identity theft. One of the more popular scams by identity thieves is to impersonate someone, file a tax return on their behalf and swipe their refund check. But once you’ve filed your tax return, the window of opportunity for identity thieves closes. If you’ve had problems with your identity being stolen in the past, or your information has been compromised, consider filing as early as you can.
• You want to avoid a dependent dispute. One of the most common reasons a tax return is rejected by the IRS is when you try to claim a dependent who has already been claimed by someone else. This often occurs when there is shared custody of a child.
• Someone needs a completed tax return from you. Completing certain transactions require your most recent tax return as evidence of your income, for example when you buy a house. Consider filing your tax return early so you can provide current tax information. This is especially important if you are self-employed and don’t have regular salaried pay stubs to use as proof of income.
• You need the refund ASAP. Of course everyone would like their refund as soon as possible. One thing to remember, though, is that while the IRS started accepting returns in January, they won’t begin processing them until mid-February. Returns that claim the Earned Income Tax Credit and the Additional Child Tax Credit will see processing of their returns start some time after Feb. 15. But otherwise, the sooner your tax return is in the queue, the sooner you should receive your refund.
• You just want to get it out of the way. Nothing reduces the stress of filing your tax return better than just getting it done. Instead of thinking about your return for several months and potentially running into a time crunch as the April filing deadlines gets closer and closer, you may want to just get it over with and file your return as soon as you are able.

Tax incentives for purchasing clean (electric) vehicles and installing high efficiency home improvements are some of the featured provisions in the recently-passed Inflation Reduction Act (IRA). Here’s a closer look at some of the bill’s tax provisions regarding the new incentives.

Clean Vehicle Credit (formerly Plug-In Electric Vehicle Credit)

Here is a summary of the details surrounding the new Clean Vehicle Credit:

• The tax credit of up to $7,500 for electric vehicles (EVs) is extended for 10 years until December 2032.
• Starting in 2023, used cars now qualify for up to a $4,000 tax credit.
• Starting in 2024, you can take the credit as a discount at the time you purchase the vehicle instead of waiting to file your tax return.
• In the past, if a manufacturer had produced at least 200,000 EVs, you could no longer qualify for the tax credit if purchasing a vehicle from that manufacturer. The new bill removes this 200,000 vehicle cap starting in 2023.

On the other hand, there are significantly more hurdles you’ll have to overcome to qualify for the new Clean Vehicle Credit:

MSRP hurdle

• New clean cars must have a manufacturer’s suggested retail price (MSRP) of no more than $55,000.
• New clean vans, pickup trucks, and SUVs must have an MSRP of no more than $80,000.
• Used clean vehicles must cost no more than $25,000.

Income hurdle

• For a new clean vehicle, your adjusted gross income must be less than $150,000 if single, $225,000 if head of household, or $300,000 if married.
• For a used clean vehicle, your adjusted gross income must be less than $75,000 if single, $112,500 if head of household, or $150,000 if married.

Domestic production hurdle

• The final assembly of a new clean vehicle must occur in North America as of August 16, 2022.
• Starting in 2023, at least 40% of critical battery minerals and 50% of battery components must be recycled, mined, or manufactured in the U.S.
• Many automakers are unsure whether they will be able to meet this criteria as the new law is currently written.

What you can do

• Wait until 2023 to buy Tesla and GM vehicles. Because Tesla and General Motors have both crossed the 200,000 electronic vehicle threshold, any Tesla or GM vehicle purchased in 2022 won’t qualify for the tax credit. Starting in 2023, certain Tesla and GM vehicles will once again qualify for the credit once the 200,000 limit is removed.
• Government to release further guidance. There are still many unanswered questions about how the new Clean Vehicle Credit will be implemented. The federal government plans to release further guidance by the end of the year that hopefully answers some of these questions.

Other Tax-Related Provisions

• Qualifying high efficiency home improvements now qualify for an annual $1,200 credit, up from a $500 maximum lifetime credit.
• Energy efficient heat pumps, heat pump water heaters, central air conditioners, wood stoves, and natural gas or oil furnaces or boilers qualify for a $2,000 credit.

What you can do

• Look for the details. Prior to purchasing new high efficient home improvements, double check how the new credit will apply to your purchase.
• Check with manufacturers. Most manufacturers are motivated to understand the new program and could be a good resource to see how they apply to your situation.

There will be more details on how to obtain these credits in the future. So stay alert and check before making any purchase decisions if you are expecting to take any of these new energy saving credits.

Consider conducting a final tax planning review now to see if you can still take actions to minimize your taxes this year. Here are some ideas to get you started.

• Review your income. Begin by determining how your income this year will compare to last year. Since tax rates are the same, this is a good initial indicator of your potential tax obligation. However, if your income is rising, more of your income could be subject to a higher tax rate. This higher income could also trigger phaseouts that will prevent you from taking advantage of certain deductions or tax credits formerly available to you.
• Examine life changes. Review any key events over the past year that may have potential tax implications. Here are some common examples:
  • Purchasing or selling a home
  • Refinancing or adding a new mortgage
  • Getting married or divorced
  • Incurring large medical expenses
  • Changing jobs
  • Welcoming a baby
• Identify what tax changes may impact you. Some of the major changes this year include the lowering of the child tax credit and the lowering of dependent care credit for working couples. This year also marks the first year in the last two with no pandemic related payments. If you think this could impact your situation it may make sense to conduct a tax planning review.
• Manage your retirement. One of the best ways to reduce your taxable income is to use tax beneficial retirement programs. So now is a good time to review your retirement account funding options. If you are not taking full advantage of the accounts available to you, there is still time to make adjustments.
• Look into credits. There are a variety of tax credits available to most taxpayers. Spend some time reviewing the most common ones to ensure your tax plan takes advantage of them. Here are some worth reviewing:
  • Child Tax Credit
  • Earned Income Tax Credit
  • Premium Tax Credit
  • Adoption Credit
  • Elderly and Disabled Credit
  • Educational Credits (Lifetime Learning Credit and American Opportunity Tax Credit)
• Avoid surprises. Your goal right now is to try and avoid any unwanted surprises when you file your tax return. It’s also better to identify the need for a review now versus at the end of the year when time is running out. And remember, you are not required to be a tax expert. Use the tips here to determine if a review of your situation is warranted.

Here are moves you can make to reduce your taxable income. But the year is quickly coming to a close, so plan accordingly.

• Tax loss harvesting. If you own stock outside a tax-deferred retirement plan, you can sell your under-performing stocks by December 31st and use these losses to reduce any taxable capital gains. If your net capital losses exceed your gains, you can net up to $3,000 against other income such as wages. Losses over $3,000 can be used in future years.
• Selling appreciated assets. Planfully sell appreciated assets in the tax year that helps you the most. While this strategy may be hard to accomplish this late in the year, it is still worthy of consideration. To do this, estimate your current year taxable income and compare it to next year’s projected income. Then sell the appreciated asset in the year that will yield the lowest tax. Remember to account for the 3.8% net investment income tax in your estimates.
• Max out pre-tax retirement savings. The deadline to contribute to a 401(k) plan for a 2022 taxable income reduction is December 31st. So if your employer’s plan allows it, consider making a last-minute lump sum contribution. For 2022, you can contribute up to $20,500 to a 401(k), plus another $6,500 if you’re age 50 or older. Even better, you have until April 18, 2023, to contribute up to $6,000 into a traditional IRA. And as long as your income does not exceed phaseout limits, you can reduce your taxable income on your 2022 tax return.
• Bunch deductions so you can itemize. If your personal deductions are near the following standard deduction amounts for 2022: $12,950 for singles, $19,400 for head of household, and $25,900 for married filing joint, consider bringing some of 2023’s spending into 2022 so you can itemize this year. For most, the easiest way is to do this is to make 2023’s planned charitable contributions before the end of 2022. You can also include gifts of appreciated stock where you get to deduct the fair market value without paying capital gains tax.
• Review health spending accounts. If you participate in a Health Savings Account (HSA), try to maximize your annual contribution to reduce your taxable income. Remember, these funds allow you to pay for qualified health expenses with pre-tax dollars. More importantly, unlike Flexible Spending Accounts (FSA), you can carry over all unused funds into future years. If you do have an FSA, you can carry forward a maximum of $570 from 2022 into 2023. The deadline for contributing to your Health Savings Account (HSA) and still getting a deduction for the 2022 tax year is April 18, 2023. The maximum contribution for 2022 is $3,650 if single and $7,300 for married couples.

While the year is quickly coming to an end, there is still time to reduce your 2022 tax liability, but only if you act now.

The beginning of a new year brings the need to recap the previous one for Uncle Sam. Here are some tips and a checklist to help get you organized.

• Look for your tax forms. Forms W-2, 1099, and 1098 will start hitting your inbox or mailbox in the next couple of weeks. If you have not already done so, review last year’s records and create a checklist of the forms to make sure you get them all.
• Collect your tax documents using this checklist. Using a tax organizer or last year’s tax return, sort your tax records to match the items on your tax return. Here is a list of the more common tax records:
  • Informational tax forms (W-2s, 1099s, 1098s, 1095-A) that disclose wages, interest income, dividends and capital gain/loss activity
  • Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items)
  • Business K-1 forms
  • Social Security statements
  • Mortgage interest statements
  • Tuition paid statements
  • Property tax statements
  • Mileage log(s) for business, moving, medical and charitable driving
  • Medical, dental and vision expenses
  • Business expenses
  • Records of any asset purchases and sales, including cryptocurrency
  • Health insurance records (including Medicare and Medicaid)
  • Charitable receipts and documentation
  • Bank and investment statements
  • Credit card statements
  • Records of any out of state purchases that may require use tax
  • Records of any estimated tax payments
  • Home sales (or refinance) records
  • Educational expenses (including student loan interest expense)
  • Casualty and theft loss documentation (federally declared disasters only)
  • Moving expenses (military only)

If you aren’t sure whether something is important for tax purposes, retain the documentation. It is better to save unnecessary documentation than to later wish you had the document to support your deduction.

• Clean up your auto log. You should have the necessary logs to support your qualified business miles, moving miles, medical miles and charitable miles driven by you. Gather the logs and make a quick review to ensure they are up to date and totaled.
• Coordinate your deductions. If you and someone else share a dependent, confirm you are both on the same page as to who will claim the dependent. This is true for single taxpayers, divorced taxpayers, taxpayers with elderly parents/grandparents, and parents with older children.

With proper organization, your tax filing experience can be timely and uneventful.

By ALICE GOMSTYN
ABC NEWS Business Unit

June 3, 2010 —

Christopher Gallagher used his federal tax refund to pay off his credit cards bills. He’ll use his North Carolina state tax refund to get his car repaired — that is, if the check ever arrives.

“I just went to go and get the mail earlier and there was nothing in there from the state,” Gallagher, of Greensboro, N.C., said Wednesday. “I’m just wondering where it’s at.”

North Carolina is one of a handful of cash-strapped states that have taken longer than usual to send tax refund checks this year.

Earlier this year, New York pushed back its refund payments by a couple of weeks while Iowa and Rhode Island both admitted to longer refund delays for some taxpayers.

Hawaii officials announced in February that they would hold back refunds until July 1, but last month provided some good news to the state’s early bird tax filers: Those who sent in their returns in January and February, at least, would begin getting their refunds immediately.

“I would like to thank the public for its patience as we continue to address our budget shortfall while at the same time positioning Hawaii for a brighter economic future,” Hawaii Gov. Linda Lingle said in a statement last month.

Veranda Smith of the Federation of Tax Administrators said it’s actually been a relatively quiet year with respect to tax refund delays.

“This could be a normal year, aside from the economy,” she said.

States that are holding back refunds this year are doing so because either they’re short-handed — it takes manpower to process returns, especially those that are mailed in instead of filed online — or because of cash flow problems.

Rhode Island’s tax refund challenges, she said, were exacerbated by the fact that a flood forced the state to delay its filing deadlines. With money coming in later from those who owed taxes, she said, the state had less cash on hand to immediately to pay those who were due refunds.

There’s a major incentive for states to provide tax refunds sooner rather than later — state laws require that states pay interest on tax refunds that are sent after specific deadlines. Deadlines vary by state but tend to be between 30 and 90 days after the state’s tax filing deadline, Smith said.

States Owe Interest to Taxpayers on Late Refunds

Last year, Georgia had to pay $2 million in tax refund interest payments after the elimination of some state tax jobs caused refund delays.

This year, it’s North Carolina that may face significant interest payments. The state was supposed to send all its refunds by the end of last month but has failed to do so for some 312,000 taxpayers, who are owed a collective $222 million.

“We are monitoring and managing the distribution of refunds each week as the state’s cash flow allows. We are working diligently to issue refunds to the citizens of North Carolina as quickly as we possibly can,” said North Carolina Department of Revenue spokeswoman Beth Stevens.

State law requires North Carolina to pay a five percent annual interest rate on late refunds.

Greensboro taxpayer Gallagher, 43, said he’s pleased that he’s eligible for extra cash, but he still would have rather just gotten his refund earlier. He said he filed his return in early April and is owed more than $1,400 from the state.

“It’s been two months,” he said. “We give them money. They use our money. They should have that money in a pot to give back to us.”