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Many are preparing to file their taxes in 2023. The IRS begins taking and processing tax returns in late January, with a deadline of April 15, providing individuals sufficient time. The promise of a faster refund is one reason tax pros recommend starting early.
Inflation Boosts Potential Tax Refunds
According to Jackson Hewitt Chief Tax Officer Mark Steber, average tax refunds dropped last year owing to pandemic-related benefits, but inflation adjustments are expected to boost them this year. Inflation has raised income criteria for 2023 tax categories by 7%, potentially placing persons in lower tax brackets with reduced tax rates.
One filer in the previous year’s 22% federal income tax bracket with taxable income from $41,776 to $89,075 would be in the same bracket in 2023 with $44,725 to $95,375. This modification could significantly reduce tax liability for persons with stable taxable incomes.
Another inflation-driven reform is a 7% rise in standard deductions, which will reduce taxable income for most taxpayers. Higher 401(k) and IRA contribution limits allow pretax contributions to protect more income from taxes.
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Early Tax Filing Provides Incentives, Security, and Timely Refunds for Three Out of Four Taxpayers
Three out of four taxpayers consider a refund the most important financial event, emphasizing the need to file taxes early. Filing early offers financial incentives and protects against identity theft because the IRS processes the return, reducing the risk of fraud.
Early filing offers adequate time for a comprehensive return review, eliminating errors that could lead to IRS inquiries or audits. This early start helps taxpayers prepare and organize cash before the April deadline.
Individuals can prepare their tax forms in January after receiving all required information from employers, banks, and other financial institutions. The IRS’s preparedness determines the formal submission. Once the IRS begins the tax season, tax preparers can queue up these forms for automatic filing, allowing taxpayers to file first and perhaps receive refunds quickly.
