Itemizing, refunds, and paying your bill during tax filing season: What you need to know.

• The standard deduction for married couples filing jointly in 2023 is $27,700, an increase of $1,800 from 2022. For single taxpayers and married individuals filing separately, the standard deduction is $13,850, an increase of $900 from the previous year.
• Failing to pay enough tax over the year and missing estimated tax payments has resulted in additional expenses.

The official start of tax filing season is today, Monday, Jan. 29, allowing you (or your tax preparer) to submit your 2023 federal tax return to the IRS for processing.

To avoid being caught off guard by new IRS guidelines or how changes in your financial life may affect your taxes, it's important to stay informed about these key points.

You may benefit from taking the standard deduction

Filing taxes involves a crucial decision: whether to opt for the standard deduction or itemized deductions. While many taxpayers choose the standard deduction, this year, even more may do so due to the rise in the amount.

The standard deduction for married couples filing jointly in 2023 is $27,700, an increase of $1,800 from 2022. For single taxpayers and married individuals filing separately, the standard deduction is $13,850, an increase of $900 from the previous year.

Although the standard deduction increased, the itemized deductions did not rise, including the SALT cap rate, as stated by Sheneya Wilson, a certified public accountant and founder of Fola Financial in New York, regarding the $10,000 limit on federal tax returns for state and local taxes.

The SALT cap was enacted as part of the 2017 tax overhaul.

"Some people who previously found it advantageous to itemize may now opt for the standard deduction in 2023, as the standard deduction has become more beneficial for many higher-income taxpayers," said IRS spokesman Eric Smith.

According to IRS data, in 2022, approximately 30% of taxpayers earning $1 million or more opted for the standard deduction.

High earners more likely to owe taxes at filing

Most taxpayers receive a refund, as per IRS data, with only 26% of filers owing tax on their 2022 returns. However, the percentage was significantly higher for high earners, with 46% of those with incomes over $1 million owing tax upon filing.

Failing to pay enough tax over the year and missing estimated tax payments has resulted in an increase in the cost of interest-based tax penalties due to the Federal Reserve's interest rate hikes.

Smith stated that by paying any taxes owed earlier, individuals can reduce its impact, as the calculation is based on a daily factor, making every day count towards the April deadline.

Avoid interest and penalties

If you miss the April 15 deadline for filing your taxes and paying the full amount owed, you will be subject to a late payment penalty. The penalty is 0.5% for each month or part of a month, up to a maximum of 25% of the remaining unpaid tax amount from the due date of the return until it is fully paid.

Wilson stated that it is true that the total amount of taxes owed adds up, especially for those with large balances. If you pay your taxes on or near the Oct. 15 due date for extensions, your tax bill will be significantly higher than if you had made a payment in April.

To file your tax return promptly, it is recommended to gather and organize your W-2s, 1099s, and other tax documents.

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