The 2023 tax filing season is now in full swing. The IRS recently released a few tips to make the filing season easier for the 146 million individuals who are expected to file returns(tinyurl.com/4acck2ja).

To avoid errors on your tax return, don't rush to file a return before you have all of your 2023 tax forms. You have until April 15, 2024. If you live in Maine or Massachusetts, you have until April 17 due to state holidays.

Among the key items are W-2 forms from employers; 1099 forms related to banks, dividends, pensions and retirement plan distributions; 1099-INT forms if you received interest payments; income statements related to any jobs in the gig economy (tinyurl.com/6ztjfcfs); and records of digital asset transactions (tinyurl.com/25skd7pj).

Don't forget to report all sources of income. Include "Goods created and sold on online platforms; investment income; part-time or seasonal work; self-employment or other business activities; services provided through mobile apps," according to the IRS (tinyurl.com/2tnyuap5).

If your 2023 earnings are $79,000 or less (individuals and families), you can use free tax software to file your return online: IRS Free File (tinyurl.com/4hsj7bnp). This software is available in English and Spanish.

For those with earnings over $79,000, there is a free service called IRS Free File Fillable Forms (the electronic version of IRS paper forms). See tinyurl.com/2ut38p5h.

If you decide to have your taxes done by a tax professional, the IRS offers a "Directory of Federal Tax Return Preparers with Credentials and Select Qualifications" (tinyurl.com/s4whsa42), where you can use a tool to search for tax preparers in your area. The IRS cautions that it "verifies attorney and CPA credentials before including them in the directory, but situations may exist where a credential subsequently becomes invalid after verification. Users should rely on the source of a credential (e.g. state board of accountancy or state bar) and not this directory for official current status. Additionally, the IRS does not endorse any preparer or credential over another."

The IRS provides general information on choosing a tax professional at tinyurl.com/yfhu8p9s.

The "Let us help you" page (tinyurl.com/29z2smzv) offers information for a number of categories, while the Interactive Tax Assistant tool (tinyurl.com/2xbfst8s) "provides answers to several tax law questions specific to your individual circumstances. Based on your input, it can determine if you have to file a tax return, your filing status, if you can claim a dependent, if the type of income you have is taxable, if you're eligible to claim a credit, or if you can deduct expenses."

Once you have filed your tax return, you can use the "Where's My Refund?" tool (tinyurl.com/2p8fh8sr) to check the status of a tax refund. You'll need your Social Security number (or individual taxpayer ID number), your filing status and the exact amount of your refund. Your refund status will appear "around 24 hours after you e-file a current year return."

If you need help, the IRS encourages you to use online resources instead of calling 800-829-1040. While local Taxpayer Assistance Centers (tinyurl.com/46w228kt) do not help prepare returns, they can offer "personal tax help when you believe your tax issue cannot be handled online or by phone, and you want face-to-face tax assistance." However, individuals and families who are eligible can get free help preparing their tax returns at Volunteer Income Tax Assistance or Tax Counseling for the Elderly locations (tinyurl.com/34jbmdxz). The AARP Foundation has free Tax-Aide sites at tinyurl.com/3jkp2t5z.

The IRS offers a video detailing its resources in both English (tinyurl.com/fsavctb9) and Spanish (tinyurl.com/bder7tc3).

If you are ready to file, here's one final thought: The IRS stresses that taxpayers should file electronically with direct deposit, as it "is still the fastest way to file and receive a refund." To steer clear of processing delays, "people should avoid filing paper returns whenever possible" (tinyurl.com/28wuwmpv).

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Since it's tax season, let's talk about a credit that not enough individuals are claiming: the EITC -- earned income tax credit.

The EITC is a refundable credit, which means it doesn't just offset taxes. You actually get a check from the government in the amount of the credit. But you have to file a tax return to get a refund, which is paid out as a check, a bank deposit or a debit card. If you file a tax return now, a refund could hit your bank account by the end of this month.

Here is an example. "Ted" is a single 22-year-old who earned $10,000 at work in 2023.

He checked an IRS table to see if he is required to file a tax return (found in IRS Publication 501, tinyurl.com/yc6zbzvu), so until he read this column, he had no plans to file. His gross income of $10,000 falls under the required filing threshold for single filers. (Different thresholds apply based on filing statuses: single, head of household, married filing jointly, married filing separately and qualifying surviving spouse.)

If you are new to working, I highly recommend you do this exercise -- you'll see why in a moment. To figure out if you need to file a tax return, use the IRS tool called "Do I need to file a tax return?" at tinyurl.com/2p8bff9h.

Test the tool by inserting the requested information (date of birth, income, filing status), then answer "no" to all questions except this one: Are you eligible to claim the earned income credit in 2023? Say yes to that, to see how the tool addresses this refundable credit.

The answer is: "You are not required to file a tax return for 2023." But, look at this: The tool tells you, "You should file a tax return for 2023. The return may generate a refund." (By the way, you would not get this result if you were under age 25 or over age 64.)

That takes you to step two of the learning process.

Ted uses a free tax software program on the IRS website (tinyurl.com/4hsj7bnp) to do his taxes. After he enters his data, he sees that the standard deduction comes to $13,850, which means his taxable income is zero, confirming there is no need for him to file a tax return or pay a tax. After he answers questions regarding eligibility, the software automatically calculates his EIC tax credit of $583. That means he will receive a refund check of $583 even though the refund is not technically a return of taxes he overpaid. It's a refundable credit.

What should Ted do with his refund? Why, fund his IRA, of course.

While we've only talked about a single filer with no children, the EITC offers a higher potential refund depending on the number of qualifying children you are claiming as dependents, whether you are married or single. One qualifier for everyone is needing to have "worked" with "earned income" below certain thresholds, which you can look up here: tinyurl.com/yd6vpu9w.

It is worth your while to go through the process I laid out for Ted to see if you qualify for the EITC? Again, my goal for you is to free up extra cash to save for retirement.

I highly recommend you read "Who Qualifies for the Earned Income Tax Credit (EITC)" at tinyurl.com/yckdc8sw.

You can use a free tax software to do a "what-if" return or you can use the EITC Assistant tool on the IRS website at tinyurl.com/bddafhrr.

Another important resource is IRS "Publication 17 (2023), Your Federal Income Tax for Individuals for Use in Preparing 2023 Returns" at tinyurl.com/yhp9zrvr.

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If you aren’t contributing to an IRA every year because of limited financial resources, you owe it to yourself to see if you qualify for the Saver’s Credit (“Retirement Savings Contributions Credit” -- see http://tinyurl.com/323rfmty).

The credit offsets income taxes dollar-for-dollar, which frees up some extra cash to contribute to an IRA. Eligibility is limited by income, capping out at $73,000 for married couples filing jointly and $36,500 for single filers. Plus, you must 1) be 18 or older; 2) not be a student; and 3) not be claimed as a dependent on a parent’s (or other person’s) tax return.

The best way to see if you qualify is to use the IRS tool called the Interactive Tax Assistant at tinyurl.com/2xbfst8s. When you go to the site, you’ll see a list of tax credits. Choose “Do I qualify for the retirement savings contributions credit?”

I used the tool to check the results for “Jimmy,” a hypothetical 23-year-old college graduate (B.A. 2022), who earned $20,000 in 2023. He wants to contribute $2,000 to a traditional IRA before the deadline (April 15, 2024) for the 2023 tax year.

The tool took me through a list of qualifying questions starting with filing status and questions about claiming any exclusions or deductions, and adjusted gross income. (Your adjusted gross income (AGI) is at line 11 of your Form 1040 or Form 1040-SR. See tinyurl.com/ms5sdjbt and tinyurl.com/araezme6.)

Then there were questions about contributions to (and distributions from) retirement plans, picking up IRAs, qualified retirement plans, 401(k)s, 403(b) annuities, governmental 457(b) plans and 501(c)(18) plans, and ABLE accounts, all of which qualify for the credit. (Another disqualifier for the credit is distributions that are as high or higher than contributions.)

The tool wrapped up with “Answers to your questions about credits.” The news was good for Jimmy: “You are a qualified individual for the Retirement Savings Contribution Credit.”

While this exercise may seem difficult, it isn’t. It’s worth the 15 minutes or so you’ll need to use the tool. If you get a positive answer, the next step is to determine the amount of the credit by filling out an easy one-page IRS tax form, Form 8880, Credit for Qualified Retirement Savings Contributions at http://tinyurl.com/32mypk2r.  The maximum credit is $1,000 ($2,000 if married filing jointly).

The alternative is to use tax software to see what happens in two scenarios.

First, you need to understand how much Jimmy will pay in taxes assuming he does not contribute to an IRA. Jimmy’s $20,000 of income creates a federal tax bill of $618.

Then, run one or more scenarios to see what happens with an IRA contribution. If you assume a $2,000 traditional IRA contribution, the full $615 tax liability goes to zero.

How? The IRA deduction of $2,000 reduces the $618 tax liability to $418. The credit wipes out the remaining $418 in full, to result in a tax of zero.

In sum, it pays to put in a little extra effort to take advantage of tax savings to relieve some of the financial pressure that can prevent you from contributing to your IRA.

In 2027, the nature of the savers credit will change to a “Saver’s Match” thanks to the SECURE Act 2.0, making it even more valuable as a savings incentive.

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