The deadline for filing taxes for the year 2024 is on April 15 this year. As the tax season approaches, the Internal Revenue Service (IRS) in the United States is reminding taxpayers that some updates for the 2024 tax year have already been implemented.
In a statement released on February 19, the IRS emphasized the importance of avoiding errors and potential processing delays by waiting to file until all necessary tax documents have been received. They also encouraged taxpayers to be prepared and understand the significant changes that may affect their 2024 tax filings. These changes include higher tax credits, increased standard deductions, and higher contribution limits.
One of the key changes according to the IRS is that the maximum Additional Child Tax Credit (ACTC) for each qualifying child has been increased from $1,600 in the 2023 tax year to $1,700 in 2024. The ACTC is a refundable portion of the Child Tax Credit (CTC) applicable to households with tax liabilities lower than the CTC amount and meet certain conditions.
The Child Tax Credit provides tax relief to eligible families with children under the age of 17 at the end of 2024, allowing them to reduce their tax burden. In the 2024 tax year, the CTC amount per eligible child is $2,000. The credit amount starts phasing out gradually once the taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds $200,000.
For the 2023 tax year, eligible individuals could claim a maximum Adoption Tax Credit of $15,950, which has been raised to $16,810 for 2024.
The IRS indicates that if a taxpayer’s MAGI surpasses $252,150, the credit amount will begin to phase out and will be fully phased out when MAGI reaches or exceeds $292,150. MAGI refers to adjustments made to AGI to assess income levels for specific tax advantages or government benefits eligibility such as healthcare subsidies and tuition waivers.
Apart from changes in tax credits, the standard deductions for all filers have also increased:
– Single or married filing separately: Standard deduction raised from $13,850 in 2023 to $14,600.
– Head of Household: Standard deduction increased from $20,800 to $21,900.
– Married couples filing jointly: Standard deduction increased from $27,700 to $29,200.
The contribution limit for individual retirement accounts (IRAs) for the 2024 tax year has been raised from $6,500 to $7,000. For those aged 50 and above, the limit has increased from $7,500 to $8,000.
The IRS also highlights changes in the reporting threshold for Form 1099-K for the 2024 tax year, applicable to taxpayers engaged in gig work or occasional online sales receiving payments.
According to the IRS, third-party settlement organizations (TPSOs) such as online marketplaces like Amazon and payment apps like PayPal are now required to submit transaction reports to individuals and the IRS when online transaction total exceeds $5,000 in 2024.
Previously, in 2023, these entities were only required to submit the form if a taxpayer’s annual income exceeded $20,000 and the transaction count reached 200. Lowering the reporting threshold for Form 1099-K to $5,000 is one step in the IRS’s plan, with the ultimate goal of reducing the threshold to $600 by 2026.
Furthermore, the IRS recommends taxpayers to utilize more of the agency’s online tools to expedite the tax filing process. They suggest skipping mail-in methods and opting for e-filing, citing that about 93% of taxpayers submit federal income tax returns electronically, with most choosing direct deposit for refunds.
Based on data from the Treasury Department’s Fiscal Service, paper refund checks are 16 times more likely to encounter issues such as being lost, misdirected, stolen, or not cashed compared to e-filing.
Taxpayers seeking personal tax information can create online accounts to access tax records, check refund statuses, make or arrange payments, and view and sign authorization forms from their tax professionals.
For taxpayers with inquiries, the IRS recommends bypassing phone consultations and using the Interactive Tax Assistant (ITA) for tax-related questions tailored to their situations.
According to the IRS, the ITA can provide guidance on various tax topics such as filing status, the requirement to file a tax return, dependent qualifications, whether specific income is taxable, eligibility for tax credits, and deductible expenses based on the information entered.
This article serves as general information for reference purposes only and does not imply any recommendations. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or other personalized financial advice. For specific investment matters, please consult with your financial advisor. The Epoch Times does not assume any investment responsibility.