The 2024 tax prep filing season will soon commence (for tax year 2023). Now is the ideal time for both individual filers and businesses to proactively prepare. Those who organize early and comprehend key tax changes can maximize savings and refunds next year. Here are some important changes to know about and some steps you can take today to be prepared when filing this upcoming tax season.
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2024 Tax Prep Deadline (for Tax Year 2023)
Mark your calendars! April 15, 2024, is the deadline for most individuals to file their 2024 tax returns, landing on a Monday. This provides taxpayers the chance to complete their tax preparations over the weekend but should be fully prepared to file as the new week kicks off.
Taxpayers who cannot file on time still have options to avoid penalties. You may request a 6-month extension to October 15, though you'll need to estimate and pay any owed taxes upfront. If owing taxes, late returns past April incur financial penalties unless you obtain a filing extension.
Learn more about how to avoid underpayment penalties with the safe harbor method by reading our guide to estimated taxes.
There is also no penalty for filing late returns if you do not owe taxes or expect a refund. But it is wise to submit as soon as possible regardless to speed up refunds or confirm you have no unexpected balance. Those anticipating refunds can submit late with no penalty, but risk delays in the IRS issuing refund checks.
Who Needs To File
If your income falls below the 2023 standard deduction threshold you might not have an obligation to file a return. Nevertheless, there can be advantages to filing, particularly for individuals with lower incomes, as excess withholdings and certain credits could potentially make you eligible to receive a tax refund. It's important to be aware of these factors that may put money back in your pocket while filing your taxes.
Higher Standard Deduction This Year
The increase in the standard deduction is indeed a positive development, especially as it's adjusted to align with inflation. This upward adjustment means that regardless of whether individuals itemize specific expenses, all taxpayers can benefit from an automatic deduction to reduce their taxable income. It essentially serves as a baseline deduction that helps alleviate the tax burden for a wide range of filers.
Filing Status | Standard Deduction |
Single, or Married Filing Separately | $13,850 |
Head of Household | $20,800 |
Married Filing Jointly | $27,700 |
Be aware: If you're 65 years or older or classified as blind, you're eligible for an extra 2023 standard deduction of $1,850 ($1,850 also applies if you're filing as single or head of household). If you happen to be both 65 and blind, this additional deduction amount doubles.
If you qualify as a dependent for another taxpayer, your 2023 standard deduction is restricted to the larger amount between $1,250 or your earned income plus $400 (yet it cannot exceed the basic standard deduction for your filing status).
Refunds From Over-Withholdings
If you were employed in 2023 and had taxes withheld from your paycheck or any other income source, like a retirement account distribution or Social Security, you could potentially reclaim part or all of the excess withholding in your tax refund.
Gather all tax forms, such as W-2s and 1099s, from each employer and income source before filing. This data is crucial for an accurate tax return and helps prevent IRS penalties, corrections, or audits in the future.
Earn Income Tax Credit
You may qualify for the Earned Income Tax Credit (EITC) by filing a tax return if your earned income was below $63,698, whether you were employed or self-employed. If eligible, the maximum amount you could receive is:
$600 if you have no dependent children
$3,995 if you have one qualifying child
$6,604 if you have two qualifying children
$7,430 if you have three or more qualifying children
Child Tax Credit
In 2023, the child tax credit for each qualifying dependent under 17 years old reaches a maximum of $2,000. However, if your modified adjusted gross income surpasses $400,000 (for married filing jointly) or $200,000 (for other filers), the credit amount decreases. While the credit itself isn't refundable, some taxpayers could qualify for a partial refund of up to $1,600 through the additional child tax credit when filing in 2024.
Energy Credits
The Inflation Reduction Act made substantial changes to various tax laws and invested in upgrading our services and technology. These enhancements aim to streamline the tax filing process and offer tax credits to individuals and businesses engaged in specific activities, many of which focus on energy efficiency and green technology.
Clean Vehicle Credit
Individuals and businesses may be eligible for a credit, potentially up to $7,500, upon purchasing a new qualified plug-in electric vehicle (EV) or fuel cell electric vehicle (FCV). Changes under the Inflation Reduction Act of 2022 affect vehicles bought between 2023 and 2032.
To qualify, the vehicle must be bought for personal use, primarily used in the U.S., and your income must be below the modified adjusted gross income (MAGI) thresholds. This credit is nonrefundable, meaning it can't exceed your tax liability, and any excess credit can't be carried over to future tax years.
Clean Vehicle Credit Income Limits
Filing Status | Income Threshold |
Single, or Married Filing Separately | $150,000 |
Head of Household | $225,000 |
Married Filing Jointly | $300,000 |
Note: Your MAGI from the delivery year or the prior year (whichever is lower) is considered, and if it falls below the threshold in at least one of those years, you're eligible for the credit.
Energy Efficient Home Improvement Credit
If you are someone who chose to make energy-efficient upgrades to your home in 2023 it could lead to reduced energy costs and potential tax benefits. Expenses on specific home improvements might qualify for tax credits if they adhere to energy.gov's outlined requirements. These improvements encompass a range of items, including exterior doors, windows, insulation materials, as well as heating and cooling systems like central air conditioners, water heaters, and furnaces.
The credit amount available is a percentage of the total expenses incurred during the installation year. For the years 2023 through 2032, the credit stands at 30%, with a maximum of $1,200, although certain items like heat pumps, biomass stoves, and boilers have a higher annual credit limit of $2,000. This amount of credit available is substantially higher than prior years so it is more important than ever to document any upgrades made and ensure they are accurately included when filing your taxes.
Tax Changes To Be Aware Of
Form 1099-K for Online Sellers and Merchants
The new 1099-K form keeps tabs on your credit/debit card swipes and third-party network payments. Now, here's the scoop: the IRS had some changes in the works for the 1099-K reporting rules, but they hit the brakes on those plans for the 2023 tax year. That means for 2023, they're sticking to the higher reporting threshold—over $20,000 in payments and more than 200 transactions—instead of the new $600 limit for third-party goods and service transactions.
Just a heads-up, even if you don't get a 1099-K, the IRS still expects you to report all your income, big or small. Quick tip: there's no specific threshold for payment card transactions, so keep an eye on those too!
For all you self-employed folks or independent contractors out there, when it's tax time, you'll usually jot down your income—including anything from those 1099-Ks—on Schedule C of your Form 1040. Now, if your business works more like a pass-through entity (think multi-member LLC, LLC opting for corporate treatment, S Corp, or Partnership), you'll need to file this info on your Form 1120, 1120S, or 1065.
Find out all you need to know about self-employment tax, including who is required to pay it and how to calculate it, by reading our guide to self-employment taxes.
Reduce Tax Fraud by Filing Early
As tax fraud cases continue to rise, filing your taxes early can serve as a safeguard to protect your information from unauthorized use. Opting for electronic filing and direct deposit is not only the fastest way to receive your tax refund but also enhances security by ensuring that no one else can file on your behalf. Direct deposit grants individuals access to their refunds quicker than traditional paper checks, minimizing the risk of fraud associated with mailed refunds.
There's No Free Lunch - Even When Filing Taxes
Tax filers should exercise caution when opting for online tax preparation services that advertise
as "free." Recent scrutiny has revealed that many of these services often come with multiple upsells and hidden fees, making it challenging for users to claim the promised free service. Despite the initial allure of no-cost preparation, most filers end up paying for these supposedly free services.
Furthermore, numerous companies entice customers with same-day refunds and additional incentives for filing through their services. However, it's important to note that most refund advance loans often come with upfront fees and steep interest rates. Considering all the fees involved, these seemingly attractive offers may, in reality, verge on being predatory, placing a substantial financial strain on the borrower, who typically requires the funds urgently.
Individuals must read the fine print and understand the terms before committing to such services to avoid unexpected charges or being misled by what seems like a free offer or quick refund.
Filing Smarter This Tax Season
To minimize errors and maximize your tax refund, tax filers should strongly consider seeking professional guidance during the upcoming tax season. As tax situations become more complicated, the risk and impact of errors increase, especially when using online software where you self-preparate your tax return. While online platforms offer convenience and ease of use, they might not encompass the complexities of an individual's financial situation.
Tax laws are intricate and subject to frequent updates, making it challenging for generic online software programs to grasp every unique circumstance accurately. Tax pros offer expertise and a deep grasp of tax laws, spotting missed deductions and errors software might miss. They assure compliance and maximize returns, crucial for complex finances or unique situations.
UnitedTax.AI stands out by combining the convenience of online tax preparation with the expertise of a professional preparer.
With United Tax, individuals and businesses benefit from the user-friendly interface of online software while having the assurance that a knowledgeable tax professional oversees their return. This hybrid model empowers filers to navigate the process efficiently while having access to personalized advice and expertise, ensuring a more accurate and optimized tax return.
