Tax season is right around the corner and, for some, it can be an arduous hill to climb. Simple mistakes made when filing can potentially cost individual Americans and businesses thousands of dollars.
Luckily, Jackson Hewitt Chief Tax Info Officer Mark Steber sits down with Yahoo Finance to discuss the best way to avoid some of the most common tax mistakes, including how best to file side gig earnings.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
AKIKO FUJITA: For more on the upcoming tax season, what filers can expect this year, we've got Mark Steber, Jackson Hewitt Chief Tax Information Officer. Mark, walk us through the key changes, first of all, that taxpayers, filers should be aware of.
MARK STEBER: Well, there were a lot of changes in 2023, even though it was a little bit slower than the prior two pandemic years. I would start off by saying there were some legislative and inflationary adjustments. The standard deduction is bigger. The rate brackets were adjusted down. The earned income credits up.
There were some green credits put into place towards the end of the year, so if you bought an alternative fuel vehicle during 2023, be sure to tell your pro about that. If you did any home improvements to help the energy efficiency of your home, some credits there as well.
But bigger than tax changes, this year and every year, are those life changes. I always tell people to look past the tax changes, the headline changes for those life changes that might not be as sexy, it might not be front page-- got married, got divorced, adopted or fostered a child or had a child, started a side gig activity, crypto, started taking care of dependent elder parents. All of those have a dramatic impact on your tax return, and mostly to the good, and sometimes get overlooked, especially if you're doing it yourself and rushing through your tax prep.
RACHELLE AKUFFO: And Mark, we know that people can go into panic mode when it comes to taxes. You feel that deadline breathing down your neck. Talk about some of the costs-- most costly mistakes that you see people make that really could be losing them out of thousands of dollars if they file incorrectly or perhaps miss some things.
MARK STEBER: Well, they-- falls into a dozen different buckets of mistakes. The number one mistake that I see, and I see it every year, is the mistake of omission. If you leave off a credit, if you leave off a deduction on your small business or self-employed return, 1 in 5 taxpayers forget to take or do not take the earned income credit every year, credit that's worth upwards of $6,000.
And here's the thing for your viewers-- if you leave off a tax benefit, the IRS is not in the scrub it and look and make sure you get bigger money, then send you a check later. If you leave it off, it stays off. So either get help or do the legwork yourself to make sure you understand all those issues. And don't rely on Uncle Bob and his internet tax knowledge. Have a pro-- even if you do it yourself-- to check on a fact or verify a myth or something that you hear.
RACHELLE AKUFFO: And I did want to ask you about side hustles-- Oh sorry, I was going to ask you. Because you mentioned some of the side hustles-- and obviously, for some people, they took on these side hustles because they couldn't keep up with the cost of living and inflation. What do they need to know about how they file?
MARK STEBER: Well, the side hustle business has certainly continued on after the pandemic. I think the last time I saw one of the FCC estimates, it's near 40 million Americans have some full or part time gig. And I'll simply say it this way. Those returns are a little bit more complicated. Those rules are a little bit more complicated. Some credits, some deductions, some options.
But here's the thing, there's no more lucrative set of tax rules than there are for small business-- big business too-- but especially for the small business. They can take deductions, they can write off expenses. And if you forget or don't know or leave that off, you're just cheating yourself out of money.
So if you're not ready to do the work to make sure you understand all the deductions that you get associated with your business, whether it's the home office or mileage or computer charges, make sure you get a pro to help you or do it or look it over for you. It's a smarter investment of your time and money.
AKIKO FUJITA: Bottom line, though, Mark, most Americans looking for a bigger tax return, right? I mean that's sort of what it comes down to at the end of the day. Two keys to doing that.
MARK STEBER: Well, the first key is don't do it at the last minute. File early. 100 million taxpayers get about $300 billion in tax refunds during season. I don't know why we have such a bad reputation. But the point is simply this. If you get panicky and you do it at the last minute, then you may be rushing, then you may not have that documentation or that expense that you need to put on your return.
Do it early, get your money early. Do it early and lock up your data with the IRS, so some schemer or scammer-- and those are out there-- can't steal your data. File early. Even if you're going to owe, you still don't have to pay until April 15 and you lock up your data.
And the number one reason to file early is that if you need more time, you have more time. You need to go find out your expenses, your home office deduction, the information related to that new dependent or that side gig expense, you have more time, you're not in a panic, and you don't shortchange yourself.
AKIKO FUJITA: Now's the time to do it, bottom line. Mark Steber, Jackson Hewitt Chief Tax Information Officer. Appreciate the tips today. Thanks so much for joining us.
