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5 Key Tax Changes You Need to Know Before Filing Your Return

The 2024 tax season is officially underway, with the IRS beginning to accept and process federal tax returns as of January 27. With over 140 million individual returns expected to be filed, millions of taxpayers wasted no time submitting their documents on opening day. The deadline for most filers remains April 15, and last year’s average tax refund was approximately $3,138.

While Congress hasn’t introduced major tax law changes, there are several updates from the IRS that taxpayers should be aware of—some of which could result in savings. Here’s what you need to know:

1. Disaster Relief & Extended Deadlines

For taxpayers affected by disasters, the IRS is offering extended deadlines and relief measures.

One of the largest groups to benefit includes nearly 10 million taxpayers in Los Angeles who have until October 15 to file and pay their taxes due to the devastating wildfires earlier this year. In addition, some filers may qualify for disaster-related tax relief on their 2024 returns or by amending their 2023 filings.

The IRS has designated specific disaster areas eligible for relief, even extending benefits to certain individuals impacted by disasters as far back as 2020. A key change is that these filers will not need to meet the usual requirement of exceeding 10% of their adjusted gross income (AGI) in personal casualty losses. Additionally, those eligible under the tax relief law passed in December can claim losses without itemizing deductions.

For example, a Florida couple who sustained significant property damage from Hurricane Ian was able to amend their 2022 return, resulting in a nearly $60,000 tax refund.

2. Online Sales & 1099-K Reporting

If you’ve been selling goods or services online, you’ll need to pay close attention to new reporting rules.

Previously, online payment platforms like PayPal and eBay only had to issue 1099-K forms to sellers who exceeded $20,000 in transactions. However, starting with tax year 2024, that threshold has dropped significantly to just $5,000. That means more sellers will receive a 1099-K form and must report their income accordingly.

Also Read – Apple to Pay $20M in Watch Settlement: Claim Your Payment Without a Receipt

Even if you don’t receive this form, any income earned from selling goods or services must be reported to the IRS.

3. Enhanced Security Measures

Taxpayers will see new security measures aimed at protecting sensitive tax data.

The IRS is expanding its use of Identity Protection PINs (IP PINs), requiring more individuals to use this unique security code. By enrolling, filers can prevent unauthorized access to their Social Security number for tax purposes. This PIN ensures that only the rightful taxpayer can file a return using their information.

Additionally, those who create an online IRS account will have access to payment status updates, direct communication with the IRS, and secure document uploads.

4. Electric Vehicle (EV) Credit Reporting

If you purchased an electric vehicle (EV) and received the $7,500 tax credit at the dealership, there’s a new step to take on your tax return.

Buyers must now report their EV purchase on their tax filings to confirm eligibility for the credit. If a taxpayer’s income exceeds the IRS limit for the credit, they will lose the $7,500 discount, even if it was applied at the point of sale.

5. Tax Penalties for Underpayment

More taxpayers are being penalized for failing to pay sufficient estimated taxes throughout the year.

A rising number of individuals are getting hit with underpayment penalties, particularly those with income not subject to withholding. In the 2023 fiscal year, the IRS saw a 15% increase in the number of taxpayers assessed penalties for failing to pay estimated taxes on time—bringing the total to 14 million.

For instance, a taxpayer who owed $100,000 in taxes but failed to make estimated payments throughout the year was assessed $7,000 in penalties and interest. The current underpayment penalty stands at 7% and is subject to change quarterly.

To avoid penalties, taxpayers should ensure they either adjust their withholding amounts or make estimated payments on time.

Also Read – Maximizing Your $2,600 Social Security Payment: 4 Effective Tax Strategies

Bonus: Expanded Free Tax Filing Options

The IRS is making it easier for more Americans to file their taxes at no cost.

The agency has expanded its Direct File program to 25 states, up from just 12 last year. This free online tool allows eligible taxpayers to file their returns directly through the IRS website, with additional support for those claiming premium tax credits for marketplace health insurance.

For those seeking tax-filing assistance, the IRS strongly advises working with a trusted tax professional to avoid scams or errors.

Fast Refund Processing

Most taxpayers can expect to receive their refunds within 21 days after filing, provided they submit electronically and opt for direct deposit.

By staying informed of these IRS changes, taxpayers can take advantage of savings opportunities, avoid penalties, and ensure a smooth tax season.

Layla Hango
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