The end of the year is here, and no one wants to think about income tax. However, the Internal Revenue Service (IRS) advises taxpayers to start preparing now to file their 2023 tax returns beginning in January of next year.
The IRS has not yet announced the date it will begin accepting 2023 tax returns, but based on last year, that day will likely be at the end of January.
According to the IRS, here are the updates for this season:
Enhancements to Online Accounts with the IRS
Taxpayers and holders of Individual Taxpayer Identification Numbers (ITIN) can access their accounts with the IRS online.
The online portal allows taxpayers to view, approve, and electronically sign powers of attorney and tax information authorizations.
The last quarterly payment for 2023 is due on January 16, 2024
Taxpayers may need to make estimated or additional tax payments due to non-wage income from unemployment, self-employment, annuity income, or even digital assets.
The Tax Withholding Estimator on IRS.gov can help taxpayers determine if they need to consider an additional tax payment to avoid an unexpected tax bill in the future.
Energy-Related Credits
Anyone who purchased a vehicle in 2023 should study the changes in the Inflation Reduction Act of 2022 to see if they qualify for credits granted to electric vehicle owners purchased in 2022.
To claim any of the credits, taxpayers will need to provide the vehicle’s VIN and submit Form 8936 with their income tax return.
If taxpayers made energy-efficient improvements to their homes, they may qualify for tax credits for a portion of the qualified expenses.
The Inflation Reduction Act of 2022 expanded the credit amounts in this category and the types of qualified expenses.
To claim the credit, taxpayers need to submit Form 5695, Residential Energy Credits, Part II, along with their tax return.
When will the refund come?
Many different factors can affect the receipt of a refund after the IRS receives an income tax return. Most refunds are issued in less than 21 days, but the IRS advises taxpayers to consider a slightly longer period, especially if they are planning a major purchase or paying a bill with that money. Some returns may require additional review and take longer to process.
Gather 2023 Tax Documents
Now is the time to start gathering tax documents. This includes year-end income documents such as W-2 Forms from employers, 1099 Forms from banks or other payers, 1099-K Forms from third-party payment networks, 1099-NEC Forms for non-employee compensation, 1099-MISC Forms for miscellaneous income, or 1099-INT Forms 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.
Changes to 1099-K
One of the biggest changes planned for tax returns in 2024 has been postponed.
The tax agency recently announced that it would delay the implementation of a 2021 law requiring payment platforms like CashApp, Facebook Marketplace, Etsy, Uber, PayPal, or Venmo to send 1099-K tax forms to anyone who received more than $600 in 2023, regardless of the number of transactions.
Instead, the IRS will use the old rule – no 1099-K unless the taxpayer receives more than $20,000 and has more than 200 transactions in 2023. This threshold will change to $5,000 for the 2024 tax year (to be paid in 2025) as part of a phased change.
The 1099-K changes do not affect income taxation. All income, including part-time work, side jobs, or the sale of goods, is still taxable and must be reported.
Source: IRS and AL