Ready or not, tax season is upon us. Filing your taxes in 2024 (for the 2023 tax year) might be slightly less complicated than in the past few years, thanks to upgraded help resources at the IRS and relatively few major changes to the tax code.
The sooner you start, the sooner you get your (potential) refund. Here are eight tips to make filing your tax return easier in 2024.
1. Take Advantage of New Online Tools
The IRS is rolling out new and improved online tools for taxpayers in the 2024 tax season. This year, IRS improvements should make it easier to file your taxes, pay your bill, protect your identity against fraudulent tax return filing and more. Here are a few highlights.
- Join the IRS Direct File pilot. If you're eligible, you can file your taxes directly with the IRS for free. This pilot program offers step-by-step guidance and live online support to help you complete your federal tax return using your smartphone, tablet or computer. The Direct File pilot is rolling out gradually in 2024. It's expected to be available to the public by mid-March.
- Use IRS Free File. In addition to offering the Direct File pilot, the IRS links taxpayers with guided tax preparation software from trusted IRS partners. Online filing with Free File costs you nothing if your adjusted gross income is $79,000 or less. Would you rather do it yourself? The Free File page has links to fillable IRS forms you can complete on your own.
- Open an online account. When you open an individual online account and verify your identity, you can set up a PIN to protect your identity (and help prevent fraudulent tax returns being filed in your name), make payments or set up a payment plan, review information from your most recent tax return and more.
- Track your refund online. The IRS Where's My Refund? tool now provides more detailed updates and works seamlessly on your mobile device so you can find out what your refund's status is.
2. Get Help in Person and by Phone
After a few difficult years on the taxpayer service front, the IRS is expanding resources this tax season to better handle in-person and phone inquiries.
- Visit a Taxpayer Assistance Center. The IRS has opened or reopened Taxpayer Assistance Centers to provide in-person service for 2024. Many offer extended hours.
- Get help by phone. More resources and an expanded callback feature mean shorter wait times when you call the toll-free IRS helpline.
3. Plan for an Extension Now if You Need One
If you can't get your tax information together by the April 15 deadline, you can file an extension to automatically move your deadline to October 15. But don't wait to pay the taxes you owe: The IRS expects you to make a good faith estimate if you want to avoid penalties and interest. Also be mindful of all IRS deadlines this year, including quarterly estimated tax payments for 2024.
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4. Check Tax Credits and Inflation Adjustments
Tax credits can reduce your tax bill significantly or increase your refund if you have one coming. This year, inflation adjustments to standard deductions and tax brackets may also lower your tax bill, if your income and other parameters stay the same.
- Standard deductions have increased across all filing statuses. If you claim the standard deduction, as most taxpayers do, your deduction should be larger this year than last. For example, a married couple filing jointly can claim a standard deduction of $27,700 in 2023, up $1,800 over 2022.
- Tax brackets have also been adjusted for inflation. Tax brackets apply progressively higher marginal tax rates to your income as it increases. The lowest income (or tax) bracket is taxed at 10%, the second bracket at 12%, the third at 22% and so on through all seven tax rates. When the IRS expands tax brackets to account for a rising cost of living, more of your income is taxed at lower rates and less at higher rates. The net result: The same taxable income in 2023 incurs less tax than it did in 2022.
- The earned income tax credit (EITC) has new income limits and credit amounts to reflect a higher cost of living. Check the IRS site for details on 2023 income limits and maximum credits.
- Other tax credits to consider include the clean vehicle tax credit, which provides a tax credit of up to $7,500 for a new vehicle and $4,000 for a previously owned vehicle if you purchased a qualifying all-electric, plug-in hybrid or fuel cell electric vehicle in 2023. The energy efficient home improvement credit gives you a credit for 30% of qualifying home improvements, including up to $600 for energy-efficient windows and $2,000 for a qualified heat pump installed after January 1, 2023.
- The student loan interest deduction is back. If you resumed payments on your student loans in 2023, you may be able to deduct up to $2,500 in student loan interest on your federal tax return. Check Form 1098-E for the information you need to claim the deduction.
5. Report Electronic Payments From Form 1099-K
You may have heard about a new reporting requirement for payments processed by digital payment companies like Venmo, CashApp or Paypal. According to a provision in the American Rescue Plan Act, third-party payment companies will be required to report transactions to the IRS for business account holders who receive at least $600 in transactions.
Widespread confusion has led the IRS to delay the $600 reporting threshold for the 2023 tax year. If you had $5,000 or more in business transactions on a third-party payment network in 2023, look for Form 1099-K, which reports your transactions to the IRS (and which you should use to report transactions on your tax return).
Also remember that, with or without a 1099-K, you still have to report income from self-employment, gig work (details below), sales of goods or other business transactions on your tax return. And, in preparation for the $600 reporting rule in 2024, now is a good time to make sure your personal Venmo, Cash App and Paypal accounts aren't set to record your personal transactions as business.
6. Count Your Gig Work as Income
Speaking of payments, if you've been earning money in the gig economy—driving for a delivery app, for example—you must report your income and pay taxes on it. Depending on whether you've worked as an employee or a contractor, you may need to file Schedule C: Profit or Loss from Business. The good news: If you are considered self-employed, you may be able to deduct some car or home office expenses. The bad news: Business taxes can be a bit more complicated. For more, visit the IRS' Gig Economy Tax Center.
7. Report Profits, Deduct Losses on Investments
Remember that capital gains taxes aren't based on the value of your investments: They're based on the profits you realize when you sell an investment for more than you paid. If you didn't sell any investment assets in 2023, you don't owe anything, at least for capital gains (dividends or interest payments count as income). However, if you sold stocks, mutual funds, real estate, cryptocurrency or another investment for a profit, you must report the gain (or loss) on your tax return and pay applicable capital gains taxes.
If you sold investments for a capital loss, you can use your loss to offset your capital gains for the year. You may also deduct up to $3,000 in capital loss against your ordinary income and do the same as a carryover loss of up to $3,000 a year until the loss is used up. Additionally, you may use a carryover loss to offset capital gains in future years.
8. File an Accurate Return
Inaccuracies in your tax return are a common trigger for an IRS audit. The IRS checks the information you provide against W-2 forms from your employer; 1099s from clients, banks or investment companies; and payment data from the government itself. If your tax return differs from what the IRS has on file, it may be flagged for a manual review, which could lead to a full-blown audit and possibly delay your refund.
Before you file, check your return for accuracy against the information the IRS has on file. You can get a free digital copy of your tax transcript by visiting the IRS' Get Your Tax Record site.
The Bottom Line
The most important tip for filing your taxes seamlessly is to get to it. If your tax return is simple (filed with a single W-2 and the standard deduction), get it done early and e-file. Avoid potential mail delays by setting up direct deposit with the IRS.
If your tax return is more complex, start gathering your information and engage help ASAP. The sooner you start the process, the more time you'll have to track down missing information, smooth out discrepancies or find a qualified tax professional to help.