Tax Season Opens
Taxpayers, start your engines! The tax season officially opens January 29th, and the IRS expects more than 128.7 million individual tax returns to be filed. To mark the event, here are some important facts:
Tax Filing Deadline: For most taxpayers, the deadline to file their personal federal tax return, pay any tax owed or request an extension to file is Monday, April 15, 2024. Taxpayers living in Maine or Massachusetts have until April 17th, due to the Patriot’s Day and Emancipation Day holidays. If a taxpayer resides in a federally declared disaster area, they also may have additional time to file.
Prepare Now: Start the tax filing process by bookmarking the IRS.gov website and check out the “Get Ready” section. You will need to gather all of your relevant information, like Social Security numbers, Individual Taxpayer Identification Numbers, Adoption Identification Numbers and this year’s Identity Protection Personal Identification Numbers (IP PIN). Additionally, don’t jump the gun until you receive all income related documents, like W2s, 1099s, unemployment compensation, dividends, pensions, annuities or retirement plan distributions.
IRS Free File: Free File is open to taxpayers with Adjusted Gross Income (AGI) of $79,000 or less in 2023. Free File lets you file your federal taxes at no extra cost either through electronic fillable forms or through IRS partnerships with private tax preparation services. If your AGI is above $79,000, you can use Free File Fillable Forms, the electronic version of IRS paper forms. According to the IRS, “this product is best for people comfortable using IRS form instructions and publications when preparing their own taxes”.
Consider Direct File: The IRS is experimenting with a new way to file taxes called Direct File, which will allow taxpayers to file their 2023 federal tax return online, for free, directly with the IRS. If you are eligible (you have to live in one of the 12 pilot states), it sounds pretty nifty: no software, mobile-friendly, easy to use, secure, accessible, and free.
Skip the Paper, File Electronically: Many of the headaches that taxpayers encounter, including errors and long wait times for refunds, could be avoided if everyone filed electronically and used direct deposit. The IRS notes that “submitting your tax return electronically ensures greater accuracy than mailing your return” and if you are due a refund, electronic filers will receive it within 21 days.
Decide Whether to Engage a Pro or Go It on Your Own: It’s tough to find someone to help with your taxes in April, so now’s the time to figure out whether or not it is necessary. If you have a complicated financial life, you may want to pay up for a professional. For example, small business owners and those who are self-employed may want someone who is familiar with Schedule C; who can advise on the best type of retirement plan; and who will let you know when you should file a Form 1099 to report any payments you made to others. If you had a lot of investment activity, sold property, or have to file an estate tax return for a deceased family member, you may also want guidance. You can check out the IRS website for tips on how to choose a tax professional.
Claiming the Child Tax credit (CTC)? Don’t Jump the Gun! If you have a child under the age of 17, you may be eligible to claim a tax credit of up to $2,000 per child when you file your tax returns. The credit is available to single and head of household filers who earn less than $200,000 and married filing jointly who earn $400,000 or below. There is a proposal in Congress that could help lower income families by increasing their CTC, but it’s not clear whether the change will get through and if it does, whether it will be in time for this tax season. Regardless of what happens with the proposal, there is an important timing issue. By law, the IRS can't release a refund for a return for certain credits until mid-February.