News & Updates
The 2024 tax filing season is approximately 45 days away. Are you ready to file your 2023 tax return(s)? Below are some tips and considerations that you can do to get ready!
Tips and Considerations for the 2024 Tax Filing Season
- Make sure your employer has your current address. It is important that your employer has your current address as it will ensure that your W2 reflects your current address. This is especially vital for taxpayers who receive their W2 through the mail.
- Electronic filing and direct deposit are key to getting the fastest refund. Filing electronically with direct deposit is important because it can help avoid refund delays. If you need a tax refund quickly, don’t file on paper. Most people with no issues on their tax return should receive their refund within 21 days of filing electronically if they choose direct deposit.
- Refunds that include the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) cannot be issued before mid-February. Why is that? The 2015 PATH Act law passed by Congress provided additional time to help the IRS process those returns and stop fraudulent refunds from being issued. The law requires the IRS to hold the entire refund – not just the portion associated with EITC or ACTC. The IRS expects most EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards by Feb. 28 if they chose direct deposit and there are no other issues with their tax return.
- Taxable income: Most income is taxable, even if you didn’t receive a year-end document such as Form 1099-MISC, Miscellaneous Income; Form 1099-INT, Interest Income; Form 1099-NEC, Non-employee Compensation. That includes interest received or money earned from the gig economy or digital assets.
The gig economy—also called the sharing economy or access economy—is an activity where people earn income by providing on-demand work, services, or goods. Often, it’s through a digital platform like an app or website.
Gig Economy Income is Taxable
You must report income earned from the gig economy on a tax return, even if the income is:
- From part-time, temporary, or side work
- Not reported on an information return form — like a Form 1099-K, 1099-MISC, 1099-NEC, W-2, or other income statement
- Paid in any form, including cash, property, goods, or virtual currency
What is Gig Work?
Gig work is an activity you do to earn income, often through an app or website (digital platform), like:
- Drive a car for booked rides or deliveries
- Rent out property or part of it
- Run errands or complete tasks
- Sell goods online
- Rent equipment
- Provide creative or professional services
- Provide other temporary, on-demand, or freelance work
Note: This list does not include all types of gig work.
What are Digital Platforms?
Digital platforms are businesses that match workers’ services or goods with customers via apps or websites. This includes businesses that provide access to:
- Ridesharing services
- Delivery services
- Crafts and handmade item marketplaces
- On-demand labor and repair services
- Property and space rentals
Note: This list does not include all types of digital platforms.
For federal tax purposes, digital assets are treated as property. General tax principles applicable to property transactions apply to transactions using digital assets. You may be required to report your digital asset activity on your tax return.
Digital assets are broadly defined as any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.
Digital assets include (but are not limited to):
- Convertible virtual currency and cryptocurrency
- Non-fungible tokens (NFTs)
Digital assets are not real currency (also known as “fiat”) because they are not the coin and paper money of the United States or a foreign country and are not digitally issued by a government’s central bank.
A digital asset that has an equivalent value in real currency, or acts as a substitute for real currency, has been referred to as convertible virtual currency.
A cryptocurrency is an example of a convertible virtual currency that can be used as payment for goods and services, digitally traded between users, and exchanged for or into real currencies or digital assets.
Transactions involving a digital asset are generally required to be reported on a tax return.
Taxable income, gain or loss may result from transactions including, but not limited to:
- Sale of a digital asset for fiat
- Exchange of a digital asset for property, goods, or services
- Exchange or trade of one digital asset for another digital asset
- Receipt of a digital asset as payment for goods or services
- Receipt of a new digital asset as a result of a hard fork
- Receipt of a new digital asset as a result of mining or staking activities
- Receipt of a digital asset as a result of an airdrop
- Any other disposition of a financial interest in a digital asset
Note: the transfer of property, including a digital asset, as a bona fide gift, requires the filing of Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return if the fair market value of the property, at the time of the transfer, exceeds the donor’s annual gift exclusion amount available at the time of the transfer.
There are good surprises and there are bad surprises. Generally, a tax-related surprise is probably unwanted. To avoid tax surprises, people should review their tax withholding. There’s still time left in 2022 to make changes and see the benefit on their tax return next year.
An adjustment made now will help people avoid the surprise of a balance due or a larger-than-expected refund. People who owe taxes when they file may also face a penalty for underpayment, so they should take steps to avoid that.
Since credit amounts may change each year, it’s imperative that a taxpayer make adjustments to their tax withholding when they make life changes. Events such as marriage, divorce, a new child, a new home purchase, or changes in tax laws can all be reasons to adjust withholding.
Proper withholding adjustments help people boost their take-home pay rather than over-withholding taxes throughout the year and getting it back as a tax refund.
Taxes are generally paid throughout the year, whether from salary withholding, quarterly estimated tax payments, or a combination of both. About 70% of taxpayers, however, withhold too much every year which typically results in a refund.
Please contact us if you need help adjusting your withholding.
The tuitions and fees deduction was replaced with an expanded income limit for the lifetime learning credit. The credit is worth up to $2,000 per tax return and covers many of the same costs as the now obsolete deduction.
Thousands of people have lost millions of dollars and their personal information to tax scams. Scammers use the regular mail, telephone, or email to set up individuals, businesses, payroll and tax professionals.
The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. Recognize the telltale signs of a scam.
Many taxpayers have encountered individuals impersonating IRS officials – in person, over the telephone and via email. Don’t get scammed. We want you to understand how and when the IRS contacts taxpayers and help you determine whether a contact you may have received is truly from an IRS employee.
The IRS initiates most contacts through regular mail delivered by the United States Postal Service.
However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations.
Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail.
NOTE THAT THE IRS DOES NOT:
- Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
- Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe. You should also be advised of your rights as a taxpayer.
- Threaten to bring in local police, immigration officers or other law-enforcement to have you arrested for not paying. The IRS also cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.
Know Who to Contact
- Contact the Treasury Inspector General for Tax Administration to report a phone scam. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
- Report phone scams to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
- Report an unsolicited email claiming to be from the IRS, or an IRS-related component like the Electronic Federal Tax Payment System, to the IRS at firstname.lastname@example.org.
On your 2020 tax return, you could exclude up to $10,200 ($20,400 married) of unemployment compensation benefits. However, this exclusion will not be available on your 2021 tax return.
You can get up to $3,000 for children ages 6 to 17 and $3,600 for children ages 5 and under, up from $2,000 for kids of all ages. To receive the full tax credit, your adjusted gross income (AGI) must be under $75,000 (Single); $150,000 (Married Filing Jointly); or $112,500 (Head of Household). If your income is above the aforementioned thresholds, you can still receive $2,000 per child if your income is less than $200,000 (single, Head of Household); or $400,000 (Married filing Jointly).
For 2021, only a $300 charitable deduction is available for single filers who don’t itemize deductions on their tax return. This charitable contribution can be up to $600 for married filers. The limit for charitable contributions in 2021 is 100 percent of your income. The limit for non-cash contribution is 50 percent of your income.
Many people move during the summer. Taxpayers who are selling their home may qualify to exclude all or part of any gain from the sale from their income when filing their tax return.
When selling a home, homeowners should think about:
Ownership and use
To claim the exclusion, the taxpayer must meet the ownership and use tests. During the five-year period ending on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years.
Taxpayers who sell their main home for a capital gain may be able to exclude up to $250,000 of that gain from their income. Taxpayers who file a joint return with their spouse may be able to exclude up to $500,000. Homeowners excluding all the gain do not need to report the sale on their tax return unless a Form 1099-S was issued.
Some taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.
Taxpayers who own more than one home can exclude the gain only on the sale of their main home. They must pay taxes on the gain from selling any other home.
Taxpayers who don’t qualify to exclude all of the taxable gains from their income must report the gain from the sale of their home when they file their tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return. Taxpayers who receive Form 1099-S, Proceeds from Real Estate Transactions, must report the sale on their tax return even if they have no taxable gain.
Generally, taxpayers must report forgiven or canceled debt as income on their tax return. This includes people who had a mortgage workout, foreclosure or other canceled mortgage debt on their home. Taxpayers who had debt discharged, in whole or in part on a qualified principal residence can’t exclude that debt from income unless it was discharged before January 1, 2026, or a written agreement for the debt forgiveness was in place before January 1, 2026.
There are exceptions to these rules for some individuals, including persons with a disability, certain members of the military or intelligence community and Peace Corps workers.
In March 2020, federal student loan payments were suspended, with interest rates set to zero as a result of COVID-19. In August 2021, the Biden administration issued an extension of the federal student loan payment suspension to January 31, 2022. With the proliferation of the Omicron corona variant, the administration has postponed repayments to May, 2022.
President is encouraging borrowers to explore other options to reduce their loans, “As we are taking this action, I’m asking all student loan borrowers to do their part as well: take full advantage of the Department of Education’s resources to help you prepare for payments to resume; look at options to lower your payments through income-based repayment plans; explore public service loan forgiveness”.
As millions head into repaying their loans, the most important thing officials and experts say borrowers can do ahead of the pause ending is make sure their contact information is up to date.
Borrowers can expect to see several communications leading up to the deadline, but having their address, email and phone numbers up to date is vital for receiving any and all information.
Borrowers between now and the end of April should also examine their current budgets and decide what they need to do, so they can be ready to make regular payments once again toward their federal student loans, experts say.