Tax changes in store for all income earners
Published 4:53 pm Friday, January 12, 2024
The Internal Revenue Service has announced Monday, Jan. 29, as the start of the tax season.
That is the day the IRS will start accepting and processing tax returns.
Returns are due April 15. The IRS expects more than 128.7 million individual tax returns this year, according to an online news release from that office last week. Income earners across the board can expect changes. IRS Commissioner Danny Werfel described the changes as improvements that include easier preparing and filing.
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For folks who generally file their tax returns online and feel comfortable doing it, a new service is on the horizon. Although it’s not up and running yet, this new pilot tax filing service called Direct File will be rolled out in phases and “widely available in March.” The service will be free.
IRS Free File opens today, Jan. 12. Participating software companies will accept completed tax returns and hold them until they can be filed electronically with the IRS. “IRS Free File Guided Tax Software, available only at IRS.gov, is available to any taxpayer or family with Adjusted Gross Income of $79,000 or less in 2023., according to the January 8 release.
Old news worth repeating is, filing electronically with direct deposit continues to be the fastest way to file and receive a refund.” Avoid paper filing. Luis D. Garcia, IRS Media Relations said the IRS received 162,037,000 individual tax returns last year and there continue to be those who prefer paper, 11,896,00 of them. Processing those paper and digital returns were 79,070 full-time positions working in every state throughout the country.
When asked how to avoid throwing up a red flag to the IRS that could result in an audit, his number one response was, “Choose a tax professional carefully.”
Candice Ensminger, Red Barn Tax Service in DeRidder, has been preparing returns for the past eighteen years. She said there are few changes to this year’s code.
“Trump changed the tax code and it’s good for eight years,” she said. “After 2024, we could see a lower standard deduction plus an exemption unless they change it.”
The biggest news for federal filers this year is the standard deduction for single filers has been increased to $14,600, a $750 increase. For those married and filing jointly, the increase adds up to $29,200, up $1,500 from the previous year.
Two common ways of reducing your tax bill are credits and deductions. Tax credits can reduce your tax bill on a dollar-for-dollar basis; they don’t affect what bracket you’re in. Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Generally deductions lower your taxable income by the percentage of your highest federal income bracket. So, if you fall into the two percent tax bracket, a $1000 dollar deduction could save you $220 is an example, according to the online site, Nerd Wallet.
Earners from high to low will be impacted by IRS marginal tax adjustments. Ensminger said that can be a result of what’s going on in the economy. The tax inflation adjustments for 2024 rose by 5.4 percent. Don’t worry about that top tax rate of 37 percent unless income was $609, 350 or more last year.
As has been the case for the past years, taxpayers can contribute to and receive the tax benefit of adding to their retirement program through April 15. Some of those amounts have been slightly increased. Ensminger said that Health Saving Accounts have similar benefits, especially for the self-employed business owner. The self-employed should claim mileage – that rate is up – and individual earners could use taxes from major purchases to benefit from itemized deductions higher than the standard. An example of a big purchase is a new car. One of her clients bought his wife a very expensive piece of jewelry, she said, and he used the tax on that purchase.
Ensminger offered an important reminder to tax filers who made energy efficient home improvements this year, especially relevant in Southwest Louisiana where recovery and repairs from the hurricanes have taken longer than expected. “If you added solar panels, insulation, windows or roofing, make sure you tell your tax preparer, “ she said. She installed two solar panels and said those have been beneficial, especially in light of Beauregard Electric’s upcoming increase.
According to an IRS news release, many different factors can affect the timing of a refund after the IRS receives a tax return. Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a 2023 federal tax refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer to process if IRS systems detect a possible error, the return is missing information or there is suspected identity theft or fraud.
Also, the IRS cannot issue refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund – not just the portion associated with the EITC or ACTC. The IRS expects most EITC and ACTC related refunds to be available in taxpayer bank accounts or on debit cards by Feb. 27, 2024, if the taxpayer chose direct deposit and there are no other issues with the tax return.