Filing your tax return is an annual reminder of how boringly complex America’s tax code is, and this year is no different.
Although not as chaotic as the year of the pandemic, many new regulations have come into effect and some changes may be introduced during the season.
Procrastination can cost you: Unpaid taxes and interest on late payments. Penalty (Yes, even fines accrue interest.) That’s more than doubled to 8% from just a few years ago.
Here are some of the latest changes to submission deadlines to keep in mind. April 15thor April 17th for residents of Maine and Massachusetts, is approaching.
Can I file my return using the Internal Revenue Service’s new free service?
Starting in mid-March, residents of certain states in 12 states will have the option to file their returns electronically using the IRS direct file program. The system is being piloted on a limited basis and will be rolled out gradually in stages, making it available only to taxpayers in relatively simple tax situations.
things to do eligibletaxpayers must have income Limited to wages, Social Security or unemployment reported on Form W-2, and interest income of $1,500 or less. You must also claim the standard deduction (do not itemize deductions).
Applicants must also reside in one of the 12 states participating in the pilot. Eight of these states (Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming) do not have a state income tax, while four states (Arizona, California, Massachusetts, and New York) have a state income tax. Although this tool does not yet provide state tax returns, it directs taxpayers to state-supported tools that can be used to prepare and file state tax returns.
For more information, see my colleague Anne Kearns’ story.
I bought a new electric car. Am I eligible for tax benefits?
perhaps. Those who purchased new electric car You may be eligible again for up to $7,500 in tax credits in 2023 (and by 2032), but the eligibility rules have been tightened. Your income and car price must be below certain limits, and the car itself must tick a series of boxes.
First, a single taxpayer must fix the adjusted gross amount income Under $150,000. A married joint filer’s income must be less than her $300,000. $225,000 for heads of households; (You can use your income in the year you acquired the car or your income in the previous year, whichever is lower.)
The manufacturer’s suggested retail price of a vehicle cannot exceed $80,000 for vans, sport utility vehicles, and pickup trucks, and $55,000 for all other vehicles. There are a lot of small details. For example, the vehicle must have final assembly in North America and must be equipped with certain battery components. You can visit. US Department of Energy site Check if your vehicle fits.
The exact amount of the credit depends on when you use it. received car and whether it meets certain standards. This credit is non-refundable. This means you can’t get back more money than you owe in taxes, and you can’t apply the excess amount to future tax bills.
Starting this year, new car buyers can now transfer credit to dealers for upfront discounts, rather than waiting to receive the money at tax filing time in 2025.
“Theoretically, it would reduce the purchase price,” said Mark Luscombe, chief federal tax analyst at information services firm Wolters Kluwer.
What about used cars?
Starting this year, if you purchase a certified pre-owned electric vehicle for $25,000 or less from an authorized dealer; you may be eligible You will receive a non-refundable credit equal to 30% of the sale price (up to $4,000).
I made my house more energy efficient. Are there new tax breaks to offset some of the costs?
yes. Thanks to the Inflation Control Act, tax breaks in these categories are now more generous and can cover more of your expenses. Additionally, some taxpayers may be able to qualify again even if they have exhausted their previous deductions in the past.
From tax year 2023, Energy Efficient Home Improvement Credit Taxpayers will be able to claim up to $1,200 each year for a lifetime, up to $500, for certain improvements made through 2032, including items such as exterior doors, windows, and insulation. Plus, you’ll receive up to $2,000 worth of annual credits toward a variety of new water heaters, heat pumps, and boilers.
Residential clean energy real estate credits such as solar panels, solar water heaters, and wind turbines will also be available again. From 2022 until 2032, the credit will be 30 percent of eligible costs (then reduced to a lower amount).
Children’s credits may change during the season. Does that mean I need to wait to file my taxes?
no. The House passed a bipartisan bill to temporarily expand it. child tax creditif enacted, benefit mainly Low-income households, especially those with multiple children. But first it must pass the Senate, where it faces difficulties. No matter what happens, taxpayers should not postpone filing their returns. The IRS can issue refunds retroactively.
“An amended return will not be necessary,” said Julie Welch, tax director at Maera Welch Brown, PC, in Kansas City, Missouri.
The existing child tax credit is worth up to $2,000 for each eligible dependent under age 17, compared to $200,000 for married filers with incomes above $400,000 and single and heads of households. The amount will be reduced if it exceeds. (I.R.S. interactive tax assistant Help determine eligibility. )
However, a portion of that credit (up to $1,600) is refundable. This means that after the credit reduces your unpaid taxes, the remaining credit will be paid to you in the form of a refund.
Inflation was terrible. Has the IRS made any changes to alleviate this?
surely. To account for high inflation, the IRS raised the federal tax cap, or income threshold for higher tax rates, by about 7 percentage points. Without the adjustment, people who received raises would have had more of their income taxed at higher rates, even if their incomes had simply kept pace with price increases.
for 2023 tax year; For example, the 24 percent tax bracket applies to incomes above $95,375 for single taxpayers and $190,751 for married couples filing jointly, with similar changes for other tax brackets. The standard deduction for a single filer increased by $900 in 2023 to $13,850 for him. For married people filing jointly, the amount increased by $1,800 to $27,700. For heads of household, it increased to $20,800.
The amount people can save in a 401(k) plan in 2023 increased from $20,500 in 2022 to $22,500. eligible taxpayer You must file your return to maximize your savings in 2023 IRA. The total contribution cannot exceed $6,500, or $7,500 if over 50 years old.
for 2024 tax year (Returns filed in 2025) These levels moved up Also.
I use Venmo for my side hustle. Will the IRS track these revenues further this year?
still.
Freelancers, gig workers, small businesses, or people with side hustles are obligated to constantly track their income and report any excess income to the IRS. 400 dollars. However, to increase compliance, online processors and marketplaces such as Venmo, PayPal, eBay, and Airbnb were to record and report more of this sales activity in 2023. It will be documented with the IRS. Form 1099-Kwhich is sent to both the IRS and the taxpayer.
People who collect income through these online payment processors or marketplaces were supposed to receive these tax forms for all payments over $600, but that requirement has changed. pushed back By the I.R.S. 2 times in a row Year.
The old rules still apply this tax season. 1099-Ks A person who sells goods or services is only required to issue one if their activity exceeds 200 transactions and total payments of $20,000 per year.
For the 2024 tax year, the IRS said it plans to lower that threshold to $5,000 in total annual payments, with no minimum transaction amount, and eventually lower it to a permanent total of $600 in payments. However, some people may receive a form with an amount above the lower limit anyway.
Ultimately, the IRS will solve problems that can arise when sending millions of new forms to people who don’t expect them or don’t pay their taxes. decided that it needed more time.
The agency is working on ways to ensure that Form 1099-Ks are issued only to those who should receive them.
There was a cap on state and local tax (SALT) tax reductions, but I heard there are ways around it. Am I eligible?
Many taxpayers in high-tax states are very disappointed in the more generous version of the SALT tax cut, which allows an unlimited deduction of all income, property, and sales taxes paid to state and local governments.
That all changed in late 2017, when the Tax Cuts and Jobs Act placed a $10,000 cap on the SALT deduction through 2025. Residents complained, and the amount eventually exceeded that amount. 30 states I came up with a workaround.
State strategies vary widely, but the key points are: Under federal tax rules, SALT limits apply to individual taxpayers, but not to corporations structured as pass-through entities. construction company, or a small law firm — according to tax experts. Therefore, if a pass-through entity (usually his S corporation or partnership) pays taxes, the individual owner deducts that entity’s taxes from his personal tax return instead of his own state or local taxes. can do.
“However, these workarounds are not available in all states, and their effectiveness may vary depending on the specific circumstances,” he said. mark friedrichvice president of government affairs at Wolters Kluwer.
It’s also complicated, and the rules and deadlines for opting in to this tax vary from country to country. stateThat’s why you need to work with a professional who is familiar with the rules.
I stepped into cryptocurrencies. What do you need to know?
When you sell stocks, bonds, or other investments, you must report any gains (capital gains) or losses, as well as any interest or dividends earned, on your tax return. To facilitate this, brokerages must prepare tax forms (including 1099-B and 1099-DIV) to help track these items reported to the IRS.
Securities firms have not previously been required to report transactions in cryptocurrencies or other digital assets, but that could change soon. rule A bill proposed last year would require submission of a new form called a 1099-DA for digital assets starting in tax year 2025.
But that doesn’t mean taxpayers will be exempt from paying for fiscal year 2023 (or any fiscal year).
“It’s the person’s responsibility to report all income, whether they receive a tax return or not,” said Eric Bronnekant, head of tax at investment firm Betterment. For more information on how it is done, see 1040 instructions similarly Taxpayer defense services and IRS website.
For example, if you buy or sell cryptocurrencies held in a traditional investment wrapper, such as a Bitcoin ETF, those transactions will continue to be tracked in your existing investment wrapper. 1099-Bsimilar to other exchange traded funds and stocks.
Are there any changes for retirees (or those nearing retirement)?
A law that took effect last year allows retirees to delay severance payments. Minimum required withdrawal amount Eligibility from tax-advantaged retirement accounts increases from age 72 in 2022 to the year you turn age 73.
In fact, this means that if you turn 72 in 2023, you can delay your first required withdrawal (in 2024) for another year, or even until April 1, 2025, according to Alta Finance’s Tax Policy.・Real Estate Planning Director David Orr said.
However, if you turn 73 in 2023 (and were 72 in 2022), the old rules apply. (This means that the first withdrawal deadline he has is April 1, 2023, and the second he has until December 31, 2023.)
These rules apply to traditional IRAs, SEP IRAs, and SIMPLE IRAs. People with 401(k)s can typically defer withdrawals until after retirement, but Roth IRAs don’t qualify until the account owner dies.
