Tax season officially started Monday, January 29th, when the IRS began accepting tax returns. Whether you plan to file your tax return early or prefer to wait a while before filing, reviewing key tax changes that may affect your tax bill is essential.
IRS tax changes for 2024
Tax provisions can change yearly, and the reasons for these changes vary. Some tax changes are due to inflation adjustments, while others result from new legislation or IRS rules.
This year, changes for the 2023 tax year are a combination of inflation adjustments, and potential last-minute tax law changes from the U.S. Congress that could impact your tax return. Here’s more of what you need to know about seven changes in particular.
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#1. 2024 child tax credit?
You may have heard that Congress is considering tax legislation that includes an enhanced child tax credit (CTC). If approved, the bipartisan tax deal would expand the popular tax credit and benefit around 15 million children in the United States.
Lawmakers were trying to pass the changes to the CTC (and other proposed changes to research and development credits for businesses) before the tax season began. However, some lawmakers have suggested that the bill could be passed in the coming weeks and applied retroactively to 2023 tax returns. (The U.S. House of Representatives passed the legislation, which is stalled in the U.S. Senate.) However, if the Senate passes the bill, the proposed changes to the child tax credit could mean a larger credit for some families.
So, stay tuned to potential tax credit changes coming at the last minute from Capitol Hill. To learn more about what Congress is discussing, see Kiplinger’s coverage of the bipartisan tax deal.
- New Child Tax Credit Deal Advances to Senate
- New Tax Credits in Last-Minute Tax Deal Would Help Families, Businesses
#2. IRS 1099-K form 2023
The IRS has delayed the so-called $600 rule for 1099-K reporting again. This time, the delay is for 2023 federal tax returns, confusing payment networks and casual online sellers. That rule would have meant that millions of people paid at least $600 for goods and services through a third-party network (think PayPal, Square, Venmo, Stripe, Cash App, etc.) would have received a Form 1099-K this month in late January or early February of this year.
Even though the IRS has postponed the $600 rule, you might have received a 2023 1099-K. It could come from any provider that paid you through an online platform, including Etsy, StubHub, eBay, etc. If you receive a 1099-K, ensure it matches the information in your records. If there are problems with your form, contact the third-party payment network that sent the form.
Related: Will You Get a 1099-K From Venmo, PayPal, or Cash App?
And remember, whether you receive a 1099-K or not, the IRS expects you to report all taxable income on your federal income tax return.
#3. Free File taxes
IRS Free File allows people with income within a specific limit to file their federal income tax returns for free. The program connects taxpayers with the agency’s trusted tax prep partners, which differs from the new Direct File pilot program mentioned below. You can use Free File this year if your adjusted gross income (AGI) is $79,000 or less. That’s a $6,000 increase over last year’s income limit for the service.
The IRS Free File program operates with tax preparation providers with various eligibility rules and products. IRS Free File has been open since January 12. If you haven’t filed your taxes yet and are interested in Free File, visit the IRS Free File site. Follow the online lookup tool prompts to find the right product for you.
#4 Tax brackets 2023
As you likely know, federal income tax rates are tied to tax brackets that change yearly for inflation. That means you could fall into a higher or lower tax bracket each year based on your income and pay a different tax rate from one year to another.
With that in mind and the start of tax season officially open, it’s good to know which bracket you fall into if you don’t already. The good news is tax brackets are more favorable this year than last due to inflation adjustments. To learn more about what that means for you and your tax bill, see Kiplinger’s guide to the federal tax brackets and income tax rates for 2023 and 2024.
#5. Standard deduction 2023
When preparing your federal income tax return, deciding whether to take the standard deduction or itemize your deductions is an important step. The standard deduction is a fixed dollar amount that reduces your taxable income, whereas itemized deductions can also lower your taxable income, but the amount varies and is not predetermined. Most taxpayers claim the standard deduction.
With the tax season starting, it's good to know the standard deduction amounts, (which, due to adjustments for inflation, are higher than last tax year) if you don't already. To learn more see our guide to the standard deduction for 2023 and 2024.
Also, if you are age 65 or older, you can take advantage of the extra standard deduction.
#6. Direct File pilot
The IRS has launched a pilot program for Direct File, its in-house tax preparation and filing system this tax season. The program enables eligible taxpayers from a dozen states to file their federal returns directly with the IRS at no cost. The pilot is currently limited in scope and mainly involves state government employees with straightforward federal tax returns. Several hundred taxpayers will be able to participate in the program as tax season progresses. However, Direct File won't work for everyone. For more eligibility information, visit the IRS Direct File program website.
Would you want to file your taxes directly with the IRS? You’ll likely have to wait until the IRS reveals the results of the pilot. In the meantime, see our coverage of the new program, including whether the agency can compete with tax prep giants H&R Block and TurboTax.
#7. State rebate payments
If, during 2023, you received a state tax rebate payment, inflation relief check, or other special rebate or "stimulus" check, you may have been wondering whether the amount will be taxable on your federal income tax return.
The IRS recently announced that it won’t challenge the taxability of most special state payments. However, the agency has said that amounts issued in some states, including Minnesota Walz checks and Arizona Families Tax Rebates, are considered taxable income.
Not having to report most special state payments on your federal income tax return is good news for many taxpayers. But, if you need clarification on whether the 2023 state payment you received is taxable, consult a tax professional before filing your federal return.
Tax season bottom line: When are taxes due?
This year, the tax filing deadline to submit 2023 tax returns or to submit an extension to file and pay taxes you owe for 2023 is Monday, April 15. If you have a valid filing extension, those returns will be due Oct. 15, 2024. The IRS may offer tax deadline extensions to those in areas impacted by natural disasters.
Related: States With IRS Tax Deadline Extensions
If you are an early filer, be sure that you have all the information you need before you file. You are responsible for filing a complete and accurate tax return, so gather your records and tax forms and double-check your taxpayer identification number and PIN.
But the IRS still says that visiting the website IRS.gov, is the fastest way to get tax refund information and answers to common tax questions. The agency also says direct deposit is the quickest way to get your tax refund if you're due one.
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