Tax season is here and for the quarter of Americans who wait until the last two weeks to wrap things up, the countdown is on. But with a little preparation and a lot of deep breaths, you can get ahead of the curve.
The Internal Revenue Service began accepting and processing 2022 tax returns last week. The agency is anticipating more than 168 million returns — so it’s important to brush up on the key facts before you file.
Some good news: Taxpayers have an extra three days (until April 18) to file this year because the normal April 15 deadline falls on a weekend and is shortly followed by Washington D.C.’s Emancipation Day.
Over the last couple of years, tax season has been confusing as federal, state and local governments provided different tax refunds and reductions — such as stimulus checks and increased child tax credits — due to the effects of COVID-19. Now, almost three years since the pandemic started, the tax system is returning to a more pre-pandemic normal with some added benefits for green energy and vehicles.
Here’s what to expect for the 2023 tax season in Philadelphia.
Tax season 2023 deadlines
The deadline to file a 2022 tax return is April 18. If you can’t file by then, be sure to request an extension and pay taxes owed by the April due date.
Those who request an extension on their 2022 tax return will have until Oct. 16 to file.
What taxes do Philadelphians need to file?
Everyone is going to have different taxes depending on how they make money and the assets they own. However, there are a few that everyone has to deal with.
You’re going to need to know how much you earned last year as an individual or business. If you’re an employee or independent contractor, your employer should provide you with the income tax documents you need.
Common taxes Philly residents must pay:
Changes to tax code in 2023
Pandemic-related tax breaks are finished. There are no stimulus checks or increased payouts for tax credits such as the Earned Income Tax Credit, Child Tax Credit, and Child/Dependent Care Tax Credit — which return to their 2019 payout amounts.
However, this year the 2022 Inflation Reduction Act granted tax breaks to eco-friendly taxpayers. For solar energy products, such as solar panels on your house, you can deduct 30% of the installation cost from your taxes. People who bought a new electric vehicle are eligible for as much as $7,500 in tax credits (however, final assembly of the vehicle had to take place in the U.S.).
Some final housekeeping: Charitable deductions such as donations need to be itemized and filed using an additional form — Schedule A (Form 1040). Also, a new PayPal and Venmo tax rule about needing to pay taxes on transactions of $600 or more is put on hold until 2024 due to taxpayers not being ready for it.
What are the fees and penalties for filing late?
After the April 18 deadline, your taxes are late and subject to interest and penalties. If you fail to file on time here is what to expect:
Federal: 0.5% interest a month on unpaid taxes, plus a 5% penalty a month on unpaid taxes owed.
Pennsylvania: 0.000192% interest a day on unpaid taxes, plus a 5% penalty a month on unpaid taxes owed.
Philadelphia: 0.75% interest a month on unpaid taxes, plus a 1.25% penalty a month on unpaid taxes owed.
If you know you’re not going to make the deadline, you can apply for an extension to file from the IRS. If granted an extension, you’ll have six extra months to file and the tax return will be due in October. Remember: Even if you are granted an extension to file, you are still required to send the estimated amount of taxes you owe before the April deadline to avoid any penalties.
If the IRS grants you an extension, Pennsylvania and Philadelphia revenue departments will automatically grant you an extension for their taxes, as well. In New Jersey, you just have to attach a copy of your federal extension application or confirmation number from the IRS with your state tax return.
When will I receive my tax refund?
You could get your tax refund within 21 days, according to the Internal Revenue Service’s website, if you do the following:
File your 2022 tax return electronically.
Request that your refund be paid as a direct deposit.
File your 2022 tax return with no errors or issues.
The IRS cannot issue refunds that include an earned income tax credit or an additional child tax credit until mid-February.
Check the status of your refund 24 hours after electronically filing with your Social Security number, filing status, and refund amount on your 2022 tax return. Taxpayers who file a paper return should wait at least six months before checking their refund status.