Navigating the 2024 Tax Season: Key IRS Updates and Tips for Taxpayers

Navigating the 2024 Tax Season: Key IRS Updates and Tips for Taxpayers

The 2024 tax season kicked off on January 29th and runs until April 15th. While you still have time, it would be wise not to wait until the last minute. In addition to relieving stress associated with last-minute tax filing, filing your 2023 tax returns early allows for a smoother and more efficient filing process. Starting early gives you the time and space to gather all necessary documents, review any IRS updates, and explore potential tax-saving strategies. Tax provisions change annually, and the reasons for this range from inflation adjustments to new legislation or IRS rules.

The IRS updates for the 2023 tax year combine inflation adjustments and potential last-minute law changes from the U.S. Congress. Some new things include an increased standard deduction, adjusted bracket rates, and changes to common tax credits and deductions. Here’s more of what you need to know about the critical IRS updates for the 2024 tax season:

IRS Online Account Enhancement

Paper-based processes have, for a long time, hampered the IRS and frustrated filers. The challenges were twofold: filers could not digitally submit forms and correspondences beyond their annual 104 tax return, and the IRS could not digitally process paper tax returns it received. This meant relying on manual processes, which often resulted in significant delays for taxpayers and challenges for IRS staff. But with the new, improved online IRS account, taxpayers and Individual Taxpayer Identification Number (ITIN) holders can quickly access their tax information. They can electronically sign a power of attorney and tax information authorizations from their tax professional.

You can also do the following with the enhanced IRS online account:

  • Obtain essential information from the most recent tax return
  • Access tax transcripts on payment history, taxes you owe, and details on payment plans you may have set up with the IRS.
  • Obtain digital copies of any IRS notices
  • Make payments through the electronic payment option
  • Set up an online payment agreement

Understanding Refund Timing and Delays

Just as each tax return is unique, so is each taxpayer’s refund. Generally, the IRS issues most refunds in 21 days or less. However, several different factors can affect the timing of your refund. The IRS, therefore, cautions taxpayers not to make immediate plans with their 2023 federal tax returns. Some returns require additional review and thus take longer to process. These include when the return has errors, is incomplete, or if they suspect it of identity theft or fraud.

Also, certain credits, such as Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC), affect refund timing. They prohibit the IRS from issuing these refunds before mid-February. They must hold the entire refund, not just the portion associated with the EITC or ACTC.

Reminder of the Last Quarterly Payment for 2023

Usually, they collect the taxes continuously throughout the year through withholding tax from paychecks. However, freelancers and non-wage taxpayers pay the IRS what is called ”estimated quarterly taxes”. Estimated tax payments should be made as income is earned, and the IRS sets quarterly collection deadlines. These dates don’t coincide with regular calendar quarters; therefore, planning is essential. The final quarterly tax payment for 2023 was due January 16th. The estimated 2024 tax payments are April 15th, June 17th, and September 16th.

The IRS charges penalties if you fail to pay enough tax yearly. You can also be penalized for late or inadequate payments, even when you are due a refund when you file your tax return. Use the Tax Withholding Estimator to determine how much you need to pay to avoid unexpected tax bills when you file your returns.

Effective Record Keeping and Document Gathering

As with all your essential documents, it helps to develop a system for organizing all your electronic and paper tax records in one place. This includes year-end income documents like Forms W-2 from employers, Forms 1099 from banks and other payers, Forms 1099-K from third-party networks, Forms 1099-MISC for miscellaneous income or Forms 1099-INT for interest paid, and Forms 1099-NEC for non-employee compensation.

Having all your documents within access puts you in the best position to file accurate returns and avoid processing or refund delays. Your document organization system needs to be secure, reliable, and streamlined to ensure efficiency when filing returns.

1099-K Reporting Threshold Update

Once again, the IRS has delayed the $600 rule for 1099-K reporting. However, the delay is for 2023 federal tax returns, casual online sellers, and confusing payment networks. Had the rule been implemented, it would have meant that millions of people who paid at least $600 for goods and services through third-party payment networks like PayPal and Stripe would have received a Form 1099-K for this tax season. This, however, is not required for now unless the taxpayer receives over $20,000 and has had more than 200 transactions in 2023.

Anyone can have the Form 1099-K using payment apps or online marketplaces. The complexity of this new provision and the large number of individual taxpayers affected has prompted the IRS to plan for a threshold of $5000 for the 2024 tax year as part of a phase to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP).

Taxpayers who receive a Form 1099-K should review it to determine if the amount is correct and establish any deductible expenses associated with the payment. You can learn more about the IRS. Understanding your Form 1099-K webpage, what to do with the form, and your course of action should you receive it by mistake.

Taxability of Income and Reporting Requirements

Any amount included in your income is taxable unless specifically exempted by law. Taxpayers must also determine if their gross income meets the required filing threshold. Also, it is essential to know that federal income tax rates are tied to tax brackets that adjust yearly to inflation. This means you may fall into a higher or lower tax bracket each year based on your income and pay different rates from year to year. The 2024 tax brackets are more favorable than the last due to inflation adjustments.

Conclusion

Keeping up with the complexities of IRS updates on tax returns can be daunting. Especially if you have unique financial circumstances or are facing significant life changes. Don’t hesitate to seek help from tax and financial professionals who can provide personalized guidance tailored to your needs.


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Explore our other Blog Posts for Small Business Owners: Navigating Business Law: Legal Advice for New Entrepreneurs and How to Negotiate Like a Pro: Essential Tips for Small Business Owners.

Additional Resource: Your Online Account at the IRS – This page outlines various features and functionalities available to taxpayers through their online accounts, including payment options, tax record access, and more​

Empower Your Business: Master the 2024 Tax Deadlines

Empower Your Business: Master the 2024 Tax Deadlines

In the complex world of business, managing your tax obligations is a cornerstone of success and legal compliance. With the onset of 2024, it’s imperative for business owners to familiarize themselves with the critical tax deadlines affecting various business structures. It helps you dodge hefty fines and stick to tax laws. Knowing when to file tax returns and make payments is crucial. Below, we outline the key tax calendar dates and deadlines for businesses in 2024, drawing on the structure provided for 2023.

1) January 31, 2024: Deadline for Distributing Tax Forms

Businesses must issue W-2 forms to employees and 1099-NEC or 1099-MISC forms to independent contractors for services provided in the previous year. The cutoff date for furnishing these documents is January 31,. This deadline is important to give everyone enough time for their tax preparations.

2) March 15, 2024: Tax Returns for Partnerships, S Corporations, and LLCs

For partnerships, S corporations, and LLCs elected to be treated as partnerships for tax purposes, the deadline to file tax returns is March 15. This date applies if your business follows the calendar year. For those operating on a fiscal year, the deadline is based on the IRS fiscal year schedule. Additionally, if you wish to elect S corporation status for 2024, you must submit Form 2553 by this date.

3) April 15, 2024: Deadlines for C Corporations, Sole Proprietorships, and Individuals

C corporations, sole proprietors, single-member LLCs, or LLCs taxed as corporations, alongside individuals, must file their tax returns by April 15, 2024. This date also marks the final opportunity to contribute to traditional and Roth IRAs for the 2023 tax year.

4) October 15, 2024: Extended Tax Return Deadline

Should you have obtained an extension for your 2023 income tax return, the extended deadline to submit your tax documents is October 15, 2024. This extension provides additional time to gather necessary information and ensure accuracy in your tax filings.

5) Quarterly Estimated Tax Payment Deadlines for 2024

For those required to make estimated tax payments remember the following deadlines for the 2024 tax year:

  • April 15, 2024: Q1 estimated tax payment
  • June 17, 2024: Q2 estimated tax payment (adjusted due to the 15th falling on a weekend)
  • September 16, 2024: Q3 estimated tax payment (adjusted due to the 15th falling on a weekend)
  • January 15, 2025: Q4 estimated tax payment for 2024

Should any of these dates land on a weekend or federal holiday, the deadline will be the next business day.

How to File a Tax Extension as a Business Owner

If more time is needed to prepare your tax return, you can apply for an extension, granting an additional six months to file. It’s crucial to understand that this extends only the filing deadline, not the payment due date for estimated taxes. Use IRS Form 4868 for sole proprietors and Form 7004 for partnerships, S corporations, and C corporations.

Timely payment of estimated taxes is crucial to avoid penalties. Staying informed of these critical dates helps ensure your business meets its tax obligations and maintains compliance with tax laws. Should you need guidance or assistance in managing your tax responsibilities, consulting with a professional is always advisable. For expert advice and support, consider reaching out to Brenden Kelley Law at 216-644-3359, where we’re ready to assist you with your tax planning and compliance needs.


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Explore our other Blog Posts for Business Owners 5 Important contracts to know when starting a Small Business and Choosing the Best Corporation in Ohio: S-Corp or C-Corp?

Additional Resource: Visit the IRS’ Small Business Self-Employed Tax Center for access to important information, dates, forms, and guidance.