Taxpayers are gearing up for the 2023 tax filing season, which officially kicked off on Monday, January 29. The Internal Revenue Service (IRS) has made several updates and reminders that individuals and couples should be aware of when filing their federal tax returns.

One crucial consideration is whether to claim the standard deduction or itemize deductions. The standard deduction has increased for the 2023 tax year, providing potential benefits for many taxpayers. For married couples filing jointly, the standard deduction is now $27,700, which is $1,800 higher than the previous year. Single taxpayers and married individuals filing separately have a standard deduction of $13,850, an increase of $900.

However, taxpayers need to keep in mind that not all itemized deductions have seen an increase. The state and local tax (SALT) deduction limit, which restricts the amount that taxpayers can deduct for state and local taxes on federal returns, remains at $10,000. This may influence some taxpayers who previously found it advantageous to itemize deductions to consider taking the standard deduction for the 2023 tax year.

According to IRS spokesman Eric Smith, the standard deduction has become more significant for taxpayers in certain income brackets since the 2017 tax reform. In 2022, around 30% of taxpayers with incomes of $1 million or more opted for the standard deduction.

Another important reminder is to avoid underpayment and missing estimated tax payments. The Federal Reserve's interest rate hikes have increased rates for interest-based tax penalties. To minimize the impact, taxpayers are encouraged to pay any tax due earlier rather than waiting until the April deadline, as the calculation is based on a daily factor.

Failure to pay taxes on time can lead to a late payment penalty. The penalty is 0.5% for each month or part of a month, up to a maximum of 25% of the unpaid tax amount from the due date of the return until the tax is paid in full. This penalty can significantly add up, especially for those with substantial balances.

Whether expecting a refund or owing taxes, experts recommend gathering and organizing W-2s, 1099s, and other necessary tax documents to file returns promptly. According to IRS data, approximately 26% of filers in 2022 had tax due, while a higher percentage (46%) of high earners with incomes of $1 million or more owed taxes when they filed.

Tax season can be a complex and crucial time for individuals and couples. Staying informed about the updated standard deduction and ensuring timely payment can help taxpayers navigate their responsibilities more efficiently.