OXFORD, Miss. – Whether you are hoping for a hefty refund, dreading a possible debt due or facing a stiff penalty, the proper preparation of tax returns is extremely important.
For this reason, two University of Mississippi accountancy professors are sharing their wisdom in hopes of helping everyone navigate this year’s tax season.
Dale Flesher, holder of the Roland and Sheryl Burns Chair in Accountancy, and his wife, Tonya Flesher, Arthur Andersen Lecturer and dean emerita of the Patterson School of Accountancy, have decades of professional experience in tax preparation. Here are their answers to some commonly asked questions:
What should individuals consider when choosing a professional tax preparer?
Tonya Flesher: The first question you have to ask yourself is whether you need a professional tax preparer. Taxpayers have the choice of preparing their own tax returns or enlisting help from other sources.
Some returns are eligible for free preparation by using the Internal Revenue Service and, in some communities, at preparation sites by community volunteers, such as the Volunteer Income Tax Assistance program.
For advice on choosing a tax preparer, consult “10 Tips for Hiring a Tax Preparer.”
What are some considerations to be made when choosing which form to file?
Dale Flesher: If you use tax preparation software from a commercial preparer, the correct form will be chosen for you. You don’t have to worry about it. Only if you were completing your return manually would you have to decide on the form to file.
In that case, a number of factors must be considered, such as amount and type of income and deductions. The IRS provides an online tool to make this decision.
How might recent changes in tax laws affect refunds and/or payments?
Tonya: There are few changes for the 2022 tax year that impact individuals. One is the elimination of the ability to deduct charitable contributions without itemizing deductions.
During COVID-19, taxpayers could take up to a $600 charitable donation tax deduction on their tax returns without itemizing deductions. However, in 2022, those who take a standard deduction may not take a deduction for charitable donations.
Also, a few tax credits will revert back to 2019 levels and some taxpayers will likely receive a smaller refund compared with the previous tax year. Changes include amounts for the Child Tax Credit, Earned Income Tax Credit and Child and Dependent Care Credit.
Those who got $3,600 per dependent in 2021 for the CTC will, if eligible, get $2,000 for the 2022 tax year. For the EITC, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get only $500 in 2022. The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
Dale: Although these changes were minor, they will likely result in smaller refunds than last year. The IRS has reported that early filers – those who filed in the first two weeks of February – have received refunds about 10% lower than last year.
What are some misconceptions about the IRS to be aware of regarding filing taxes?
Tonya: Many people will complain that they had to pay taxes when they filed their return, but that everyone else they knew didn’t have to pay but got a refund. If that is true, it is because getting a tax refund indicates that the taxpayer paid more in income taxes during the year through withholding or estimated tax payments than the tax liability on their income tax return.
Those who don’t get refunds simply did not pay in their fair share during the year.
Another misconception is that if you get an extension to file your tax return late, then you can delay payment of tax. That is not the case. Federal income taxes are due on April 18 and if not paid by that date, penalties and interest will be applied.
What are some other considerations?
Dale: I suggest that taxpayers should start thinking now about how to save on their 2023 taxes.
The recently passed Inflation Reduction Act included a few new tax provisions, most of which deal with tax credits that can be applied on next year’s tax return. These mostly deal with credits for buying an electric car or truck, or purchasing new energy-efficient appliances.
Start thinking about these credits if you are in the market for a new vehicle or energy-saving appliances.