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The tax deadline is now less than a month away for the majority of Americans.
According to the latest data from the Internal Revenue Service (IRS), approximately 63 million returns have been filed so far this season, with the average refund up 5.8% from last year.
That’s less than half of the 146 million returns the agency expects to receive this year, meaning the majority of taxpayers still have to file their returns in the coming weeks.
Although experts warn that the “toolbox” of options is now much smaller for lowering your tax bill through deductions and credits, there are still steps you can take to make filing easier — and cheaper.
Here are three things to consider before the filing deadline.
The April 15 tax deadline is just a month away for the majority of Americans.
1. Free Deposit Options – Save $160
This season, Americans have a variety of free deposit options to choose from.
Last week, the U.S. Department of the Treasury announced that Direct File – the IRS’s free tax filing program – was now fully open in 12 states.
The service is open to taxpayers in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.
Americans who live in these states, have simple filing needs, and who report certain tax credits and deductions on their tax returns can create an account and file their taxes at any time, the IRS said.
According to a report Thanks to the Economic Security Project, within five years the program could save the average tax filer $160 a year – and hours of their time.
It projects it could collectively save $11 billion a year between filing fees and time costs.
“By removing barriers to filing, Direct File would also provide up to $12 billion each year in additional tax credits to low-income families who currently do not have them,” it reads.
Taxpayers in any state with an adjusted gross income of $79,000 or less can also file a return for free using Free file.
The service allows eligible taxpayers to use guided software to prepare a return with one of eight tax preparation partners.
IRS Commissioner Danny Werfel said many Americans don’t realize they’re neglecting the Earned Income Tax Credit.
2. Claim a lesser-known credit – on average $2,541
The Earned Income Tax Credit (EITC) is a refundable tax credit for low- and moderate-income workers.
To claim the EITC, you must meet income requirements and cannot recover a certain amount of investment income.
You don’t have to have a child to qualify for the credit, but generally, the more children you have, the higher the credit amount will be.
For this tax season, the credit amounts are $600, $3,995, $6,604 and $7,430, depending on your filing status and the number of children you have.
Nearly one in five eligible filers miss out on the credit, which averaged $2,541 last season, according to IRS Commissioner Danny Werfel.
“It’s a lot of money” and millions of Americans “just don’t know it,” he said earlier this year.
Some taxpayers may also be eligible for tax credits for purchasing an electric vehicle or making energy improvements to their home in 2023, according to the agency.
According to accountant Tom Wheelwright, it’s not yet too late to take some action.
3. Reduce your tax bill – $1,560 in some cases
After the end of the calendar year, “the toolbox of options is much smaller” for reducing your tax bill, said John Loyd, owner of The Wealth Planner. CNBC.
For example, for a charitable donation to be considered tax deductible, it must have been made before December 31 to be declared on a return filed next April.
But there are still certain measures that it is not yet too late to take, experts say.
There’s still time to contribute to a pre-tax Individual Retirement Account (IRA), which may offer a deduction, depending on your income and participation in a workplace plan.
For the 2023 tax year, the contribution limit is $6,500 – or $7,500 if you are 50 or older.
This can be done until the April tax deadline.
For example, a worker who pays a 24 percent tax rate and contributes $6,500 to an IRA would pay $1,560 less in federal income taxes. Sure, they need to have a spare $6,500, but that’s money they’re paying themselves to use in the future, so it’s going to a good cause.
And many people don’t know that they can contribute earned income to the IRA account of a low-income or non-working spouse if they file a joint tax return as a married couple, said the Certified Public Accountant Tom Wheelwright.
You can also still contribute to a Health Savings Account (HSA), if you have a qualifying insurance plan.
HSAs offer tax-free contributions, growth, and withdrawals for qualified expenses such as doctor visits, dental and vision care, and medications.