What You Need To Know About Filing Taxes In 2023

A lesser refund could be in store for you this year due to changes in IRS tax credits. The IRS has warned that the elimination of tax advantages from the COVID-19 period may cause many Americans to receive lesser refunds or have larger amounts owed on their tax returns this year.

Several disaster tax credits, including the Child Tax Credit (CTC), have been reinstated at their 2019 amounts. Taxpayers eligible for a $3,600 per dependant credit in 2021 will be eligible for a $2,000 per kid under the age of 17 credit in 2024.

The Earned Income Tax Credit for taxpayers without dependent children would decrease to $500 in 2024 from $1500 in 2021. In 2024, the maximum allowable Child and Dependent Care Credit will decrease from $8,000 to $2,100.

Be mindful that the above-the-line deductions for charitable contributions, now $300 for individuals and $600 for couples filing jointly, have not been extended in 2024. To benefit from these tax breaks this year, taxpayers must use the itemization method.

The primary filing date for all federal tax returns and payments is slated for April 18, 2023, giving filers an additional three days to meet April 17, 2023, deadline.

The main changes for the 2024 tax year are essentially a narrative about a return to the status quo, Eric Bronnenkant, head of Betterment, said. Tax advantages from the “Pandemic Era,” including the many rounds of stimulus funds and the enhanced child tax credit, have tapered off.”

Since these exceptional provisions no longer apply, Bronnenkant said, refunds for many people will be reduced.

If you anticipate receiving a lesser tax refund this year but still have an outstanding debt that has to be repaid, a personal loan may be an option for you.

Changes to side hustle income reporting are delayed by the IRS. 

The Internal Revenue Service is putting off a new rule for disclosing money from a side business. In 2024, third-party settlement organizations (TPSOs) like PayPal and Venmo were supposed to start sending out Form 1099K to their customers, small enterprises, and independent contractors, detailing their revenue and the number of transactions totaling more than $600.

Previously the form was only required to be submitted if the individual or corporation had done 200 or more transactions through a third-party network with a combined value of at least $20,000.

In December, the IRS said it would hold off on implementing the new reporting standard to prevent uncertainty during the forthcoming 2023 tax filing season and offer more time for taxpayers to prepare for and understand the new reporting obligations.

According to Karla Dennis, president of Karla Dennis & Associates, the IRS was poised to make substantial changes to the 1099-K form for this tax season, but those changes have just been deferred until the 2024 tax season. The IRS will have no record of the money produced by small company owners, which is fantastic news.

Changes Made to 2023 Inflation Tables

Tax rates and basic deductions have seen more inflation changes in recent years than in the past, and the IRS makes those changes annually. According to Armine Alajian, CPA and founder of the Alajian Group, while adjustments have been reflected in the 2024 federal tax rates, the changes that will likely make more of an impact will be implemented in 2023.

It is expected that taxpayers will feel the effect of the federal income tax bracket modification next tax season. When they file for the 2023 tax year, Alajian added. The 2024 revisions were less severe, but the 2023 modifications may be more advantageous for some people.

The standard deduction, which is available to all taxpayers unless they choose to itemize, will be affected by inflation as follows in 2023:

The standard deduction for a married couple will rise to $27,700; for 2024, the current standard deduction is $23,200. For single filers and those filing a separate return in 2023, the standard deduction will be $13,850, an increase of $900 from 2024. A rise of $1,400 brings the standard deduction for head of household to $20,800 in 2024.