Personal finance

Here are some important items for taxpayers to consider before filing their 2023 tax return

Kseniya Ovchinnikova | Moment | Getty Images

The opening of tax season is approaching — and experts have a few reminders before you file.

The IRS expects to receive more than 128.7 million individual tax returns before the deadline for most filers, which is April 15.

Generally, the best way to avoid a delayed refund is by filing a complete and electronic return and using direct deposit. Last year, the average refund was roughly $3,200.

Here are the key things taxpayers need to know before filing this season.

1. Watch for proposed child tax credit changes

House lawmakers last week advanced a bipartisan tax package with proposed changes to the child tax credit for 2023. If enacted, the adjustments could provide a bigger tax break to lower-income U.S. families, according to estimates from the Urban-Brookings Tax Policy Center.

Currently, the child tax credit is worth up to $2,000 per qualifying child for 2023, which reduces your taxes on a dollar-for-dollar basis. For 2023, $1,600 of the credit is refundable, meaning you can still get at least $1,600 without taxes owed.

“There are 19 million children who do not get the full child tax credit because their parents’ income is too low,” said Chuck Marr, vice president for federal tax policy for the Center on Budget and Policy Priorities.

There are 19 million children who do not get the full child tax credit because their parents’ income is too low.
Chuck Marr
Vice president for federal tax policy for the Center on Budget and Policy Priorities

The proposed changes would increase the refundable portion of the credit to $1,800 for 2023 and make the formula more generous for families with multiple children.

However, negotiations for the bipartisan tax plan are ongoing. If enacted, the child tax credit changes could happen after the tax season begins Jan. 29.   

Experts say eligible families shouldn’t rush to file before possible legislation changes. If you claim the refundable part of the child tax credit, you may not get a refund earlier than Feb. 27, according to the IRS.

2. Know the reporting changes for Form 1099-K

If you received business income via payment apps such as Venmo and PayPal, or from e-commerce companies such as eBay, Etsy or Poshmark, you’re less likely to get a tax form for 2023 — thanks to an IRS change in November.

For 2023, you can expect payment apps to send Form 1099-K if you had more than 200 transactions worth an aggregate over $20,000. But the IRS will phase in a $5,000 limit for 2024.

Don’t lean towards that inclination to cheat if you didn’t get a 1099-K.
Bill Smith
National director of tax technical services at CBIZ MHM

Regardless of whether you receive Form 1099-K for 2023, you still must report business income, according to Bill Smith, national director of tax technical services at financial services firm CBIZ MHM.   

“Don’t lean towards that inclination to cheat if you didn’t get a 1099-K,” he said.

3. Consider free tax filing options

There are several options for filing your federal taxes for free this season, including a limited Direct File pilot through the IRS.

While there’s not an official launch date for Direct File, the agency aims to have the pilot widely available to certain taxpayers by mid-March, according to IRS officials.

Eligible states include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.

Internal Revenue Service

“The 2024 pilot is an opportunity for the IRS to learn how best to deploy Direct File to meet the needs of taxpayers and test core improvements to the tax filing experience,” Laurel Blatchford, the U.S. Department of the Treasury’s chief implementation officer for the Inflation Reduction Act said in a statement Thursday.

Other free tax filing options may include:

  • IRS Free File: Free File offers online guided tax prep software if your adjusted gross income is $79,000 or less.
  • Volunteer Income Tax Assistance: VITA provides nationwide basic tax prep if you make up to $64,000.
  • AARP Foundation Tax-Aide: Low- to moderate-income filers over age 50 may qualify for Tax-Aide.
  • MilTax: There’s also a free filing option for members of the military community.
  • Free Fillable Forms: Taxpayers of all income levels can use Free Fillable Forms from the IRS, the electronic equivalent to filing a paper return.

Articles You May Like

Beyoncé bounce: Western boot sales jump more than 20% week over week since ‘Cowboy Carter’ launch
There’s another ‘tricky’ tax deadline on April 15. Here’s how to avoid a penalty, experts say
China’s commercial property segment is seeing some bright spots amid a slump in the wider realty sector
Citigroup tops estimates for first-quarter revenue on better-than-expected Wall Street results
Biden administration to forgive $7.4 billion in student debt for another 277,000 borrowers

Leave a Reply

Your email address will not be published. Required fields are marked *