Key Considerations for Taxpayers in Filing 2024 Income Tax Returns: Insights from the IRS

The IRS has unveiled a set of considerations for taxpayers gearing up for the 2024 tax filing season.

Notable updates include enhanced features in online accounts, such as the ability to review, authorize, and electronically sign power of attorney and tax information authorizations. Users can also access information on taxes owed, payment history, request tax receipts, apply for payment plans, and verify bank accounts. The IRS emphasizes the importance of avoiding refund delays and encourages taxpayers to familiarize themselves with the timing of refunds.

“Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a 2023 federal tax refund by a certain date, especially when making major purchases or paying bills,” the agency said.

“Some returns may require additional review and may take longer to process if IRS systems detect a possible error, the return is missing information, or there is suspected identity theft or fraud.”

The IRS emphasized that refunds for individuals claiming Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) won’t be processed before mid-February.

. These credit refunds are anticipated to reach taxpayers’ bank accounts by Feb. 27. The agency underscored the efficiency of filing returns electronically and opting for the “direct deposit” method as the quickest way to receive refunds, surpassing the processing time for paper checks.

Prepaid debit cards and mobile apps may facilitate direct deposit of refunds if they have associated routing and account numbers that can be entered on the tax return.

The IRS also addressed credits related to energy for taxpayers who purchased an electric vehicle. To claim these credits, taxpayers must provide the vehicle’s VIN and include “Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit” when filing their returns.

For those who bought a new electric vehicle in 2022 or earlier, eligibility for the credit can be checked online. There’s a separate link for those who made the purchase in 2023.

Taxpayers making energy improvements in their homes can claim credit by filing “Form 5695, Residential Energy Credits, Part II” with their returns. The IRS recommends taxpayers establish a record-keeping system to consolidate relevant tax information in one place.

This encompasses paperwork such as Form W-2 provided by employers, Form 1099 issued by banks or other payers, Form 1099-K from third-party payment networks, Form 1099-NEC covering nonemployee compensation, Form 1099-MISC for miscellaneous income, and Form 1099-INT for interest payments.

“When they have all their documentation, taxpayers are in the best position to file an accurate return and avoid processing or refund delays,” the agency stated. The last quarterly estimated tax payment for 2023 is due on Jan. 16, 2024.

The IRS also issued a reminder regarding Form 1099-K reporting, specifically applicable to individuals involved in gig work and casual sellers generating additional income through the sale of services or goods.

Effective this year, a new IRS regulation mandates third-party payment networks like PayPal, Venmo, Amazon, and Square to issue Form 1099-K when a user accumulates more than $600 in gross sales from goods and services transactions within a single year. This marks a significant change from the previous threshold of over $20,000 in gross sales.

While the IRS is in the process of implementing the new rule, the tax year 2023 will be considered a “transition year,” providing some relief to taxpayers.

“This will reduce the potential confusion caused by the distribution of Forms 1099-K sent to many taxpayers who wouldn’t expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023,” the agency said.

“Given the complexity of the new provision and the large number of individual taxpayers affected, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold.”