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January 29 is the Official Start of Tax Season

January 9, 2024 by ndeters Leave a Comment

The IRS will begin accepting and processing tax returns on Monday, January 29, 2024

The IRS will not officially begin accepting and processing tax returns until Jan. 29, people do not need to wait until then to work on their taxes. Most software companies accept electronic submissions and then hold them until the IRS is ready to begin processing later this month. IRS Free File will also be available on IRS.gov starting Jan. 12 in advance of the filing season opening. The IRS Direct File pilot will be rolled out in phases as final testing is completed and is expected to be widely available in mid-March to eligible taxpayers in the participating states.

Internal Revenue Service has been making some changes to help simplify the process of preparing and filing tax returns. A lot of these changes are the result of the Inflation Reduction Act and they include:

Expanded in-person service that meets taxpayers where they are by opening or reopening Taxpayer Assistance Centers (TACs). The IRS will also offer extended hours at many TACs nationwide.
Increased help available on the toll-free line and an expanded customer call back feature designed to significantly reduce wait times.
Improvements to the Where’s My Refund? tool, which is the IRS’ most widely used taxpayer service tool. However, the tool provides limited information, often leading taxpayers to call the IRS to inquire about their refund status. Updates to Where’s My Refund? will allow taxpayers to see more detailed refund status messages in plain language. These updates will also ensure Where’s My Refund works seamlessly on mobile devices. Taxpayers often see a generic message stating that their returns are still being processed and to check back later. With the improvements, taxpayers will see clearer and more detailed updates, including whether the IRS needs them to respond to a letter requesting additional information. The new updates will reduce the need for taxpayers to call the IRS for answers to basic questions.
Enhanced paperless processing that will enable taxpayers to submit all correspondence, non-tax forms, and responses to notices digitally and will be able to e-File 20 additional tax forms. Achieving this milestone will enable up to 125 million paper documents to be submitted digitally per year.
An enhanced IRS Individual Online Account that includes chat, the option to schedule and cancel future payments, revise payment plans and validate and save bank accounts.
A new, pilot tax filing service called Direct File that gives eligible taxpayers a new choice to file their 2023 federal tax returns online, for free, directly with the IRS. It will be rolled out in phases and is expected to be widely available in mid-March. Find more about Direct File pilot eligibility, scope and the participating states on Direct File.

April 15th is Still the Deadline

April 15th is still the deadline for filing with the exception of people living in Maine and Massachusetts. Those taxpayers have until April 17 due to the Patriot’s Day and Emancipation Day holidays.

New Tax Brackets and Standard Deduction for 2024

December 7, 2023 by ndeters Leave a Comment

The IRS announced the higher limits for the federal income tax brackets and standard deductions in November. The increase is intended to avoid a phenomenon known as “bracket creep,” which happens when taxpayers are pushed into higher-income brackets even though their purchasing power is essentially unchanged due to steeper prices for most goods.

The IRS makes such adjustments annually, but in times of high inflation, the increases are more significant and impactful for taxpayers. Although inflation has fallen considerably over the past year, it remains higher than both the pre-pandemic average and the Federal Reserve’s 2% target.

This year, the tax brackets are shifting higher by about 5.4%.

The higher thresholds where tax rates take effect could mean savings for millions of Americans across all income brackets.

Standard deduction

The standard deduction, which reduces the amount of income you must pay taxes on, is claimed by a majority of taxpayers.

It will rise to $29,200, up from $27,700 in 2024 for married couples filing jointly, amounting to a 5.4% bump. For individuals, the new maximum will be $14,600 for 2024, up from $13,850, the IRS said.

Heads of households will see their standard deduction jump to $21,900 in 2024, up from $20,800.

Tax brackets for single individuals:

The IRS is increasing the tax brackets by about 5.4% for both individual and married filers across the different income spectrums. The top tax rate remains 37% in 2024.

10%: Taxable income up to $11,600
12%: Taxable income over $11,600
22%: Taxable income over $47,150
24%: Taxable income over $100,525
32%: Taxable income over $191,950
35%: Taxable income over $243,725
37%: Taxable income over $609,350

Tax brackets for joint filers:

10%: Taxable income up to $23,200
12%: Taxable income over $23,200
22%: Taxable income over $94,300
24%: Taxable income over $201,050
32%: Taxable income over $383,900
35%: Taxable income over $487,450
37%: Taxable income over $731,200

Deducting Vehicle Expenses

May 25, 2023 by ndeters Leave a Comment

Actual Expenses vs. Standard Mileage Rate

If you use your car for business purposes, you may be able to deduct the cost of operating your car as a business expense. There are two ways to do this: you can use the standard mileage rate, or you can itemize your actual expenses.

The standard mileage rate is a fixed amount that the IRS sets each year. For the 2023 tax year, the standard mileage rate for business use is 65.5 cents per mile. This means that if you drive 100 miles for business purposes, you can deduct $65.50 from your taxable income.

To use the standard mileage rate, you must keep a log of all the miles you drive for business purposes. The log should include the date, the purpose of the trip, and the number of miles driven. You can use a simple spreadsheet or a dedicated mileage tracking app to keep your log.

You can also use the standard mileage rate if you lease your car for business purposes. However, if you lease your car, you must use the standard mileage rate for the entire lease period. You cannot switch to the actual expense method in later years.

If you choose to itemize your actual expenses, you can deduct the cost of all of the expenses that you incur in operating your car for business purposes. This includes the cost of gas, oil, repairs, insurance, depreciation, and any other expenses that are directly related to the use of your car for business.

To itemize your actual expenses, you must keep detailed records of all of your expenses. This includes receipts, invoices, and any other documentation that supports your expenses.

The standard mileage rate is generally a more convenient option than itemizing your actual expenses. However, if you can itemize your actual expenses and the total amount of your expenses is more than the standard mileage rate, you may be able to deduct more by itemizing.

Requirements for Taking the Deduction

To take the standard mileage deduction, you must meet the following requirements:

You must use the car for business purposes.
You must keep a log of all the miles you drive for business purposes.
You must own or lease the car.
You must not have claimed a depreciation deduction for the car in any previous year.

If you meet all of these requirements, you can deduct the standard mileage rate from your taxable income.

Calculating the Deduction

To calculate the standard mileage deduction, you multiply the standard mileage rate by the number of miles you drove for business purposes. For example, if you drove 10,000 miles for business purposes in 2023, you would deduct $65,500 from your taxable income.

You can deduct the standard mileage deduction on Schedule C of your Form 1040. If you are a sole proprietor, you will claim the deduction on Schedule C. If you are a partner in a partnership, you will claim the deduction on Schedule K-1. If you are an employee, you will claim the deduction on Form 2106.

Example

Let’s say that you are a self-employed consultant who drives your car 10,000 miles for business purposes in 2023. You keep a log of all of your miles, and you have receipts for all of your expenses.

To calculate your deduction, you would multiply the standard mileage rate of 65.5 cents per mile by the number of miles you drove for business purposes, which is 10,000 miles. This gives you a deduction of $65,500.

You would then report this deduction on Schedule C of your Form 1040.

Conclusion

The standard mileage deduction is a valuable tax break for taxpayers who use their cars for business purposes. If you meet the requirements, you should consider taking the deduction to save money on your taxes.

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