Tax season will kick off Jan. 29 when the Internal Revenue Service officially starts accepting and processing 2023 federal income tax returns.
The IRS expects more than 128.7 million individual tax returns to be filed by the April 15 tax deadline.
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The IRS on Monday noted that people do not need to wait until late January to work on their taxes if they’re using software companies or tax professionals.
Most software companies will accept electronic submissions, the IRS said, and then hold them until the IRS is ready to begin processing on Jan. 29.
IRS “Free File” will be available on IRS.gov starting Friday. The IRS “Free File” system is available to a taxpayer or family with an adjusted gross income of $79,000 or less in 2023.
In limited states, the IRS will be testing a new “Direct File” system. Michigan is not included in the list of 13 states released in October. Select taxpayers will be able to prepare and file their federal income taxes online directly with the IRS for free under a very limited test program in 2024. Taxpayers who file a Schedule C, for example, cannot participate in the pilot in 2024.
On Monday, the IRS said the “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.
Among other updates, the IRS said that improvements have been made to its “Where’s My Refund” tool at IRS.gov. The changes will allow taxpayers to see more detailed refund status messages in plain language.
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“These updates will also ensure ‘Where’s My Refund’ works seamlessly on mobile devices,” the IRS said.
“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.”
Who files early
Early filers tend to be those people who are due a large refund. Last year, the average refund dipped below $3,000 — specifically to $2,933 — based on IRS data available through March 17, 2023. That was down 11.3% from a year ago, thanks to less lucrative pandemic-related tax breaks.
Taxpayers, of course, don’t want to rush to file their 2023 income tax returns if they don’t have all their necessary paperwork.
UAW members who were on strike at the General Motors, Ford Motor Co. and Stellantis during the 46-walkout at key factories and facilities in 2023 need to report income from their strike pay. Strike pay is taxable both on the federal level and on Michigan income tax returns. Strike pay is reported on a Form 1099-MISC and the UAW will issue that paperwork. The UAW website notes that after $600 in strike pay is received in one year, the UAW will issue individual members an IRS Form 1099-MISC.
Savers who have money in certificates of deposit or savings accounts — perhaps taking advantage of high interest rates in 2023 — also need to make sure that they accurately report the interest earned on their savings. They’re going to need the 1099-INT forms that are issued by a financial institution by Jan. 31. These forms can arrive in February.
The IRS noted Monday: “People should report all their taxable income and wait to file until they receive all income related documents.”
And that’s especially important, the IRS said, for people who may receive various 1099 forms from banks or other payers reporting unemployment compensation, dividends, pensions, annuities or retirement plan distributions.
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Most taxpayers didn’t see the widespread headaches with lengthy delays for refunds in 2023 as they did earlier during the pandemic. In general, tax refunds arrived pretty much on time. And many phone calls to the IRS, including those made by tax professionals, did get through in 2023 after complaints skyrocketed the year earlier about calls that never got through and wait times that were absurdly long.
Remember, it can take up to 21 days to receive a federal income tax refund via direct deposit. But often refunds for e-filed returns are issued in less time than that.
A key exception: Taxpayers claiming the earned income tax credit or the additional child tax credit aren’t able to get a refund before mid-February by law. The IRS must delay issuing those refunds in order to avoid fraudulent claims early in the season.
On Monday, the IRS said early filers can expect to see most refunds related to the earned income tax credit or the additional child tax credit to be in bank accounts or on debit cards by Feb. 27 under key conditions. The Feb. 27 date depends on whether the tax filer electronically files the tax return, chooses direct deposit, and the IRS has no other issues with the return.
To be sure, the IRS faced plenty of challenges in 2023 and some ongoing headaches remained for some taxpayers. Many taxpayers, for example, continued to face long wait times if they waited for an IRS employee to answer their call on some days. Those filing amended returns also reported headaches waiting for refunds in many cases.
We will see what the new tax season, which kicks off officially Jan. 29, brings.
Contact personal finance columnist Susan Tompor: [email protected]. Follow her on X (Twitter) @tompor.
Source: https://t-tees.com
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