2023 Key Tax Tips

Disclaimer: Any U.S. federal tax advice contained in the article is not intended to be written or used and cannot be used or relied upon, to avoid tax-related penalties under the Internal Revenue Code, or to promote, market or recommend to another any tax-related matter addressed herein.

Tax season is upon us. The deadline to file 2023 taxes for individuals in Maryland is Monday,

April 15, 2024. Xavier Epps, CEO and founder of XNE Financial Advising, LLC provides more tax tips to keep in mind.

Q: What are a few considerations when choosing a tax preparer?

A: Be wary of red flags such as guarantees of large refunds, a self-prepared stamp on your tax return indicating you prepared them and not the professional you’ve paid (refusal to take responsibility for the prepared return), or requests for a percentage of your refund as a fee. A reputable tax preparer should act professionally and adhere to ethical standards. Additional items to consider when choosing a tax practitioner/preparer include: 1.) Consider the tax preparer’s experience and specialization. Some tax preparers focus on specific industries or types of tax returns. Choose someone with relevant experience to your financial situation. Experienced tax preparers are better equipped to navigate complexities. 2.) Check reviews and testimonials from other clients. A positive reputation is a good indicator of a reliable and trustworthy tax preparer. 3.) Understand the tax preparer’s fee structure upfront. Some tax preparers charge a flat fee, while others may charge based on the complexity of your tax situation. Beware of hidden fees and ensure you clearly understand the total cost of their services.

Q: What are items of interest for Maryland tax filers?

A: As a certified licensed tax preparer by the Maryland State Board of Individual Tax Preparers, I’ve noticed many taxpayers are unaware that Maryland offers some exclusions for retirement income, including Social Security benefits and certain pension income. Please share such with your tax preparer to lower the amount of income that’s taxable. Understanding these exclusions can impact your taxable income considerably. Maryland offers specific tax benefits for military personnel, including exemptions for military retirement income. Active-duty military members may also have specific rules regarding income earned while stationed outside of Maryland.

Q: Are there any new tax credits in Maryland?

A: If you or your dependents pursue higher education, you may be eligible for education-related tax credits or deductions. Maryland residents should explore options like the Student Loan Debt Relief Tax Credit and other education-related incentives.

Q: Are there any tax law changes or new laws?

A: Each year, Congress passes new tax laws or amendments, which become part of the existing Internal Revenue Code (the last time the tax code was rewritten was in 2017). For 2023, changes included the credit expansion of new electric vehicles (EV) through 2032, worth up to $7,500 to taxpayers (credits for used vehicles are up to $4,000). Another change is the expansion of the Energy Efficient Home Improvement Credit, allowing taxpayers to deduct up to 30 percent of the cost of qualifying green home upgrades from their tax bill, with a maximum credit of $1,200 per year for the next 10 years (until 2032).

Q: What are a few often overlooked tax deductions to consider?

A: Taxpayers may take a credit or a deduction for income taxes paid to a foreign country. This benefit reduces taxpayers’ taxes when the U.S. and another country tax the same income. Another overlooked deduction is military reservist travel expenses. (Armed forces reservists who travel more than 100 miles away from home and stay overnight in connection with service can deduct the cost if they aren’t receiving per diem for such). Lastly, regarding the selling costs associated with selling your home, a taxpayer can lower their taxable capital gain by the amount of your selling costs—including real estate agent commissions, title insurance, legal, advertising, administrative, escrow, and inspection fees.

Q: Who should file for a tax extension? 

A: File a tax extension if you have a complicated tax situation (This usually involves more than just a W2, such as rental property, businesses, investments, childcare, tuition statements and mortgage information, for example, would qualify for a possible extension). Please note that an extension only gives you extra time to file, but not additional time to pay. So, if you believe you’ll owe, it’s best to send in a payment as early as possible before you file the extension or with the extension. Take this extended time to present the best tax situation to the IRS and state as much as possible, which could help save a considerable amount of money versus rushing to meet the deadline and reporting inaccurate information.

Q: Why is it important for tax filers to address filing tax returns from any previous years?

A: It’s important to address filing tax returns from prior years first because there are potential credits (i.e., carryforward) that you may be able to claim in future years, but you’d only know of such if you file the earlier returns first as opposed to the latest ones now. Another essential reason to address the older returns is that taxpayers have three years to claim tax refunds. If you focus on the latest years now and ignore the older returns, you can risk losing out on refunds that the government will surely keep. In 2019, the IRS issued a notice sharing that approximately $1.5 billion (yes, billion) in refunds for tax year 2019 would run out to be claimed in a few months if the 1.5 million taxpayers didn’t file a return.

Find out more about Epps’ services via www.xnefinance.com and www.financeguyx.com. Follow him on social media via https://twitter.com/FinanceGuyX;  https://www.instagram.com/FinanceGuyX; or https://www.facebook.com/FinanceGuyX.