The IRS just recently began accepting 2024 Income Tax Returns. So, let’s look at important considerations before you tackle that terrible task.
DIY or professional tax preparer:
In the past most people hired an enrolled agent, CPA or other tax professional to tackle their tax return. But times have changed. Some very intuitive, almost error-proof software is available for the neophytes, most even include suggestions and warnings that you may have either made an input error or missed a precious deduction.
Below are our top tax software picks and why they got picked:
· TurboTax Deluxe: Thorough, comprehensive, yet easy to use.
· H&R Block: For those who feel they need customer support for guidance.
· TaxSlayer: Decent features and lowest cost.
· Cash App Taxes: Even cheaper, in fact offering a free option for simple returns.
· FreeTaxUSA: If you qualify for the IRS Free File program, this one is simple to use and covers most of the basic tax situations.
Most common mistakes taxpayers will make on their returns:
Math errors: Simple addition or subtraction mistakes can delay processing.
Incorrect Social Security numbers: Make sure all numbers match exactly as they appear on the Social Security card.
Misspelled names: Ensure the names of all taxpayers and dependents match their Social Security cards.
Incorrect filing status: Choosing the wrong status can affect your tax bracket and eligibility for credits.
Missing deductions or credits: Don't forget to claim all the deductions and credits you're eligible for.
Unsigned forms: An unsigned return isn't valid.
Incorrect bank account numbers: Double-check your routing and account number.
Filing too early: Wait until you have all your tax documents to avoid mistakes.
Using tax software can help catch many of these errors before you file your return!
What are the major tax changes from 2023 to 2024?
There have been several notable tax changes from 2023 to 2024.
The standard deduction has increased for all filing statuses. For 2024, it's $29,200 for married couples filing jointly (up $1,500), $14,600 for single taxpayers and married individuals filing separately (up $750), and $21,900 for heads of households (up $1,100).
The income thresholds for each tax bracket have been adjusted for inflation. For example, the top tax rate of 37% now applies to individual incomes over $609,350 (up from $578,150 in 2023).
The Alternative Minimum Tax (AMT) exemption amount has increased to $85,700 for 2024, up from $81,300 in 2023.
The maximum Earned Income Tax Credit (EITC) amount has increased to $7,830 for taxpayers with three or more qualifying children, up from $7,430 in 2023.
The threshold for 1099-K reporting has been lowered to $5,000 for 2024, meaning more transactions will be reported to the IRS.
Contribution limits for retirement accounts have also increased. You can contribute up to $23,000 to 401(k) plans. If 50 or older, you can contribute up to $30,500.
The annual contribution limit for IRAs in 2024 is $7,000. If you are 50 or older, you can contribute up to $8,000.
Health flexible spending account contributions are up to $3,200 in employee pre-tax salary reductions to fund your health flexible spending arrangement.
These changes were designed to help taxpayers keep pace with inflation and adjust to the economic environment.
When can you expect your tax refund?
According to IRS.gov most refunds are processed within 21 days of receiving a federal tax filing, although there are variations when it comes to processing time. For those who e-filed their returns and requested direct deposit of their tax refund, expect to see the fastest turnaround time.
But if you have complex investments, your own business, multiple companies and other relatively exceptional but complex tax situations, expect to wait longer; more so if these tax situations are considered areas of potential tax abuse from the IRS perspective.
You can check the status of your refund with the IRS. Gather up your Social Security number or Individual Taxpayer Identification number (ITIN), your filing status (single, married, filing jointly, etc.), and the exact refund amount anticipated and was entered on your tax return.
Go to Where’s My Refund or the IRS2Go app, any time after one full business day following e-filing (a month if the return was paper). Return received, Refund approved, and Refund sent are the three possible status responses to your query.
That is, unless your return has errors or is incomplete. Mistakes and blanks are the hobgoblin of tax returns that gum up the works and result in more work and more time required. Filing a paper return and requesting a paper check, can exacerbate the entire process even more when errors are found by the IRS.
Many states provide similar trackers on their ‘Department of Revenue’ websites, and you will be asked to provide similar information to track your state tax return. As for the IRS and your federal return, here is where to call if you encounter any problems or difficulties:
1-800-829-1954 (toll-free) or call 1-800-829-1040 and ask to speak with a representative.
Summary:
Now that we’ve covered the major changes from last year to this year and have encouraged you to consider trying out individual tax preparation software, we should mention one final yet important consideration.
People tend to be excited about a big tax refund. They would rather the large refund than must write a check to the IRS. But remember. The money the government was using will not be returned to you with interest. So, from a purely financial standpoint you should seek to simply pay to the government an estimate of what you think you are going to owe in taxes. Rodd Mann writes about carving out a creative and unique new career in a changing world. His own career has taken him all over the world, working in accounting, finance, materials, logistics and manufacturing operations. Author, teacher, writer, consultant, Rodd has worked in many high-tech roles. Follow him here: www.linkedin.com/in/roddyrmann
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