From the Financial Hotline
By: Financial Hotline
Winter 2023 (Vol. 40, No. 4)
Q: Does everyone have to file a tax return?
A: If your income is not from self-employment and it does not exceed your standard deduction, you aren’t required to file a return in 2022. For example, if you are single and under age 65, with income less than $12,950, you may not be required to file. However, even if you aren’t required to file, there are many reasons you may still want to file. If you are due a refund, you won’t receive it unless you file a return. You may also be due money back from the Earned Income Credit or for insurance premiums you paid (Premium Tax Credit). You may also need to show a return to qualify for college financial aid or other benefits.
Q: For the medical expense deduction, can I claim the cost of hearing aids that were not covered by insurance?
A: Yes, you can deduct payments for false teeth, reading or prescription eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, and for a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities. You can also deduct payments for transportation primarily for and essential to medical care that qualify as medical expenses, such as payments of the actual fare for a taxi, bus, train, ambulance, or for transportation by personal car; the amount of your actual out-of-pocket expenses such as for gas and oil; or the amount of the standard mileage rate for medical expenses, plus the cost of tolls and parking. The standard mileage rate allowed for a car when you use it for medical expenses is 18 cents for January 1, 2022 to June 30, 2022 and jumps to 22 cents for the remainder of the year.
Q: I am filing a tax return for the first time. How should I prepare?
A: Typically, your year-end forms arrive by mail or are available online by the end of January. Gather all your tax related documents and keep them in one place. These documents include but are not limited to: Forms W-2 from employers, Forms 1099 from banks or other payers, Form 1099-K from third-party payment networks, Form 1099- NEC for nonemployee compensation, Form 1099-MISC for miscellaneous income, or Form 1099-INT if you were paid interest, as well as records documenting all digital asset transactions. Carefully review each income statement for accuracy and contact the issuer to correct information that needs to be updated. Don’t forget any deduction or credit related receipts that were listed above that may qualify you to itemize.
The IRS recommends all taxpayers sign up for an online account. An IRS Online Account lets taxpayers securely access their personal tax information, including tax return transcripts, payment history, certain notices, prior year adjusted gross income, and power of attorney information. Filers can log in to verify if their name and address are correct. They should notify the IRS if their address has changed. They must notify the Social Security Administration of a legal name change to avoid a delay in processing their tax return.
Q: How long should a refund take?
A: Many different factors can affect the timing of a refund after the IRS receives a return. Although the IRS generally issues most refunds in less than 21 days, taxpayers should not rely on receiving a 2022 federal tax refund by a certain date. As such, making major purchases or paying bills is not wise until the refund is received. Some returns may require additional review and may take longer to process if IRS systems detect a possible error, the return is missing information, or there is suspected identity theft or fraud.
Also, taxpayers should be aware that the IRS cannot issue refunds for people claiming the EITC or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund – not just the portion associated with EITC or ACTC.
The fastest way to get a tax refund is by filing electronically and choosing direct deposit. Direct deposit is quicker than waiting for a paper check in the mail. It also avoids the possibility that a refund check could be lost, stolen, or returned to the IRS as undeliverable. Prepaid debit cards or mobile apps may allow direct deposit of tax refunds. They must have routing and account numbers that can be entered on a tax return.