Learn from Tax Day, 2023

Categories : Financial, News
April 19, 2023

Tax Day 2023 has arrived, albeit a little later than usual, due to a calendar-based adjustment. Unless an Automatic Extension has been granted, which is as simple as filing Form 4868, Individual Returns are due by April 18, 2023. Regardless of Extension status, any tax owed from 2022 is also due. Adding insult to injury, the 2023 Quarter 1 Estimated Tax Payment (Form 1040-ES) is due on the same date for taxpayers who do not have sufficient withholding along the way.

April 18, 2023, is also the drop-dead date for 2022 IRA deposits. These can be made from your tax refund, if available. It is also possible to purchase iBonds from the Treasury with your refund, simply by asking.

Rather than blindly accepting the work of your tax preparer, even if you did it yourself via TurboTax or another online service, April represents the best opportunity to learn from your Individual Return. There are many line items in every Return that can provide insight to help us manage (legally) the amount we are required to pay.

Fundamentally, here is how the Tax formula works: (a) compute Gross Income from all sources; (b) apply specified adjustments on Form 1040 to arrive at Adjusted Gross Income; (c) compute Itemized Deductions, or use the Standard Deduction, whichever is higher, to determine Taxable Income; (d) find your Gross (preliminary) Tax from the Tables or Formulas from IRS; (e) Apply Tax Credits if you are eligible. From there, compare the total amount owed to total payments made along the way, resulting in either a refund or money owed to IRS.

America’s Tax Code is a nightmare of complexity, constantly changing, and seemingly doling out punishment for the simple act of being a hard-working, successful American. As disgusting as that is, we are forced to live with it, and we may as well figure out how to do the best we can for ourselves.

In a few days (or even less), your Tax Return will be filed away, or stored on your computer hard drive. While it is fresh in your mind, learn from current information, and apply the lesson going forward.

Tax Preparers, who are generally in the midst of a hectic and high-pressure time of the year, don’t always have time to ask probing questions and explore options for a reduced tax bill. As Certified Financial Planners®, Van Wie Financial offers Tax Planning services.

Please note that we are not Tax Professionals or Preparers. Our role is in Tax Planning and working with your Tax Preparer to help you save money on taxes while investing for eventual Financial Independence.

Van Wie Financial is fee-only. For a reason.