Preparing tax returns isn’t most people’s idea of a good time—but it is something that must be done before the deadline each year. For those looking to get a head start on their returns, however, there are some important changes to be aware of for the 2024 tax year.
1099-K Forms
The IRS has announced that it is further delaying the “$600 rule” for 1099-K reporting. This means that payment vendors and other parties are not being held responsible for reporting payments of $600 or greater on 1099-K forms. Taxpayers, therefore, should not rely on receiving a 1099-K to report miscellaneous income and should instead keep their own records of this type of income.
It is also important to remember that just because vendors aren’t being required to issue 1099-K forms for the 2024 tax year, this doesn’t mean that taxpayers are not responsible for reporting and paying taxes on this type of income. In fact, taxpayers should report and pay applicable taxes on all income, even if it falls below the $600 threshold for 1099-K reporting.
Tax Bracket Adjustments
Tax brackets are adjusted for inflation each year — and because there has been significant inflation between 2023 and 2024, it is possible that some taxpayers’ brackets may have changed. Now is a good time for all taxpayers to confirm their tax brackets based on their income for the 2024 tax year. This can be done on the IRS website. For example, the 10% tax rate has been adjusted up to $11,600 for single taxpayers and up to $23,200 for married couples filing jointly.
Standard Deduction Adjustments
Just as tax brackets and marginal tax rates have been adjusted to account for inflation, the same concept applies to the standard deduction. For those who typically take the standard deduction when preparing their tax returns, it is important to note that this fixed dollar amount has increased for the 2024 tax year. While unlikely, this could have the potential to affect some taxpayers’ decisions to take the standard deduction or itemize.
According to the Congressional Research Service (CRS), the standard deduction for single filers in 2024 is $14,600, and the deduction for married couples filing jointly is $29,200.
IRS Free File
While this isn’t entirely new for the 2024 tax year, the IRS is trying to raise awareness of a “Free File” program that allows taxpayers who meet certain eligibility criteria to file their federal income tax returns for free through the IRS website. Typically, single taxpayers with an adjusted gross income (AGI) of $79,000 or less are eligible to use the program—but this can vary depending on some other factors. For those who haven’t yet begun preparing their tax returns and would like to take advantage of the option to file for free, the IRS Free File website is the best place to start.
IRS Direct File
For the 2024 tax year, the IRS is also piloting a “Direct File” program that allows some taxpayers to file their federal returns directly through the IRS at no cost, rather than through a third-party tax preparation service. This in-house preparation program is currently available to taxpayers in just 12 states, but the hope is that eligibility will spread as the program gains popularity.
What About Child Tax Credits?
There has also been a lot of talk about the potential for child credits to be expanded for the 2024 tax year. This was especially true around the 2024 presidential election, as major party candidates made their own plans and proposals regarding changes to child tax credits. It is not yet currently known whether any changes will be enacted for the 2024 tax year, but it is worth keeping an eye on a proposed bipartisan tax deal that could expand the credit for many families.
When in Doubt, Consult a Tax Professional
With tax season looming, now is the time for taxpayers to start considering how changes for the 2024 tax year could affect them. At the end of the day, one of the best things to do is to consult with a tax professional before starting a tax return. This way, taxpayers can get a better feel for how tax changes could impact their filing decisions while ensuring that they don’t leave any of their hard-earned money on the table. If you have any questions or would like additional information, please contact our tax team.
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