IRS Issues Alert on 6 Tax Steps to Do Now

IRS Issues Alert on 6 Tax Steps to Do Now

We don’t yet know the date the Internal Revenue Service will begin accepting tax returns in 2024, but, based on last year, that day is likely only a few weeks away.

In 2023, the IRS began processing returns on Jan. 23. In 2022, the start day was one day later on Jan. 24.

Whatever the day, there are things taxpayers should do now to get ready for the filing season, including some changes to existing tax credits.


Check Your Online Account

The IRS has enhanced some of the offerings on taxpayer’s online accounts.

Taxpayers and Individual Taxpayer Identification Number, or ITIN, holders can now access their Online Account and view, approve and electronically sign power of attorney and tax information authorizations from their tax professional.

With an Online Account, individuals can also: View their tax owed and payment history and schedule payments; request tax transcripts.; view or apply for payment plans; see digital copies of some IRS notices; view data from their most recently filed tax return, including adjusted gross income; and validate bank accounts and save multiple accounts, eliminating the need to re-enter bank account information every time they make a payment.


Understand Refund Timing

Many different factors can affect the timing of a refund after the IRS receives a tax return.

While most refunds are issued in less than 21 days, taxpayers are advised not to rely on receiving refunds by a certain day, especially if they are making a major purchase or paying a bill. 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, or 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 – to cut down on identity fraud. Most of the refunds for those claiming these credits will be available in bank accounts or via debit card on Feb. 27, 2024 if the taxpayer chose direct deposit and there were no other issues with the return.


Gather 2023 Tax Documents

Now is the time to start getting your tax documents together and set up a place to keep those papers as they come in – either electronically or on paper. This includes year-end income documents like Forms W-2 from employers, Forms 1099 from banks or other payers, Forms 1099-K from third-party payment networks, Forms 1099-NEC for nonemployee compensation, Forms 1099-MISC for miscellaneous income or Forms 1099-INT for interest paid, as well as records documenting all digital asset transactions.

Having all the proper documentation puts taxpayers “in the best position to file an accurate return and avoid processing or refund delays,” the agency said.


1099-K Changes

One of the biggest planned changes for tax filings in 2024 has been delayed.

The tax agency announced recently it was delaying the implementation of a 2021 law that requires payment platforms such as CashApp, Facebook Marketplace, Etsy, Uber, Paypal or Venmo to send 1099-K tax forms to anyone who received more than $600 in 2023, no matter the number of transactions.

Instead, the IRS will use the old rule – no 1099-K unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023. That threshold will change to $5,000 for tax year 2024 (payable in 2025) as part of a phase-in period.

The 1099-K changes don’t impact the taxability of income. All income, including from part-time work, side jobs or the sale of goods is still taxable and must be reported.


Understand Energy Related Credits

Taxpayers who bought a vehicle in 2023 should review the changes under the Inflation Reduction Act of 2022 to see if they qualify for the credits for new electric vehicles purchased in 2022 or before or the new clean vehicles purchased in 2023 or after. To claim either credit, taxpayers will need to provide the vehicle’s VIN and file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, with their tax return.

If taxpayers made energy improvements to their homes, tax credits are available for a portion of qualifying expenses. The Inflation Reduction Act of 2022 expanded the credit amounts and types of qualifying expenses. To claim the credit, taxpayers need to file Form 5695, Residential Energy Credits, Part II, with their tax return.


Direct Deposit

Filing electronically and choosing direct deposit is the fastest way for taxpayers to get their tax refund. Taxpayers without a bank account can learn how to open an account at an FDIC insured bank or through the national Credit Union Locator tool. Veterans should see the Veterans Benefits Banking Program for access to financial services at participating banks.

Prepaid debit cards or mobile apps may allow direct deposit of tax refunds as long as they have routing and account numbers associated with them to enter on the tax return. Check with the mobile app provider or financial institution to confirm which numbers to use.


Source: IRS Issues Alert on 6 Tax Steps to Do Now (December 13, 2023) Leada Gore