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New Tax Credits for 2024: What You Need to Know

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With the 2024 tax season on the horizon, it's crucial to keep abreast of the tax changes and new tax credits that could affect your tax filing season. Our comprehensive guide will delve into the latest updates, offering essential insights to assist you in navigating the evolving tax landscape. We'll discuss everything from enhanced online account features to revised reporting thresholds, ensuring you're well-prepared for the tax season 2024.

IRS Online Account Enhancements

The Internal Revenue Service (IRS) has upgraded its Online Account platform, enhancing the experience for taxpayers and Individual Taxpayer Identification Number (ITIN) holders. Now, users can utilize their Online Account to view, approve, and electronically sign power of attorney and tax information authorizations for their tax filing. The platform also allows for checking tax owed, reviewing payment history, scheduling payments, obtaining tax transcripts, and reviewing key data from previous tax returns, simplifying the tax filing process and giving taxpayers more autonomy over their tax-related affairs.

Refund Delays and Timing

Understanding the factors that influence your refund status is vital, as they can affect the timing of your tax refund. The IRS aims to issue refunds within 21 days, but additional reviews, incomplete tax returns, or suspected fraud can delay this process. Furthermore, for those claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC), the IRS holds refunds until mid-February. Taxpayers can expect most EITC and ACTC-related refunds to be available in their bank accounts or on debit cards by February 27, 2024, if they opt for direct deposit, according to the latest tax refund news.

Quarterly Payment Due Date

For those with non-wage income, such as unemployment benefits or earnings from self-employment, understanding estimated tax payments is crucial. The IRS's Tax Withholding Estimator can aid wage earners and self-employed individuals in determining if they need to make additional tax payments to avoid surprises during the tax season. The final quarterly payment for the 2023 tax year is due on January 16, 2024, which is essential for accurate tax return submissions.

Gathering Tax Documents

To prepare for tax filing, start by collecting all necessary tax documents, including Forms W-2 from employers, various Forms 1099 for income, interest, and miscellaneous payments, and records of digital asset transactions. Having these documents ready is key to ensuring accurate tax returns and avoiding delays in processing or refunds.

Revised 1099-K Reporting Threshold

Responding to feedback, the IRS has updated new IRS rules concerning the reporting threshold for Form 1099-K. The $600 threshold for third-party settlement organizations will not apply for the 2023 tax year, maintaining the previous requirement of over $20,000 and more than 200 transactions. This provides an additional transition year before implementing the reduced threshold, which is expected to be $5,000 for the 2024 tax season.

Energy-Related Credits

If you've purchased a vehicle in 2023, you might qualify for electric vehicle tax credits or clean vehicle credits under the Inflation Reduction Act. It's important to review the eligibility criteria for these tax credits when filing your tax return. For energy improvements to your home, the Inflation Reduction Act also offers tax credits, which can be claimed by filing Form 5695, Residential Energy Credits, Part II.

Direct Deposit for Faster Refunds

Filing taxes electronically and opting for direct deposit is the swiftest method to get your tax refund. Direct deposit ensures faster access to funds than a paper check would, and it's crucial to provide precise bank account details to facilitate a seamless refund process. For those without a bank account, FDIC-insured banks or credit unions are available to help open one. Veterans should consider the Veterans Benefits Banking Program, which offers financial services at participating institutions. Moreover, prepaid debit cards and mobile apps can be used for direct deposit of tax refunds if they have the necessary routing and account numbers.

Child Tax Credit Changes

The Child Tax Credit (CTC), a significant financial aid during tax filing season, has seen updates for the 2024 tax year. To be eligible for the CTC, individuals must have an adjusted gross income (AGI) of $200,000 or less, or $400,000 or less for joint filers. The CTC provides up to $2,000 per qualifying child under 17, with up to $1,700 being refundable. Understanding the eligibility requirements, such as providing majority support for the child and ensuring they reside with you for over half the year, is vital when preparing your tax return.

Additional Tax Credits for Parents

New parents may be eligible for tax credits like the Adoption Credit and the Child and Dependent Care Credit, which help offset the costs of raising a child. The Adoption Credit offers up to $15,950 for adoption expenses per child for those with a modified adjusted gross income (MAGI) under $239,230, phasing out at $279,230. Although it's non-refundable, you can carry forward any unused credit to subsequent tax years. The Child and Dependent Care Credit aids working parents with 20% to 35% of qualified expenses, up to $3,000 for single filers and $6,000 for joint filers, on their tax return.

Head of Household Status

Single parents may be eligible for the head of household status, which provides more favorable tax brackets and a higher standard deduction ($20,800 for the 2024 tax year) than filing as a single taxpayer without dependents. It's important to indicate this status on your tax return or inform your tax preparer to take advantage of the associated tax benefits. Married individuals who are the primary financial providers for their child might also qualify for head of household status when filing separately.

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is a refundable tax credit for low to moderate-income earners, which can be especially beneficial for those with children on their tax return. The EITC amount is determined by earned income, filing status, and the number of qualifying children, with a maximum of $3,995 for taxpayers with one child in the 2024 tax year. To claim the EITC, you must meet certain income thresholds and file a tax return.

Adjust Your W-4 Withholding

As a new parent, updating your W-4 form to reflect your dependent status is crucial. This adjustment in tax withholding can increase your take-home pay by reducing the taxes withheld from your paycheck, though it may lead to a smaller tax refund. To find the best withholding amount for your situation, consider consulting a tax professional or using the IRS Tax Withholding Estimator.

Stay Informed and Seek Professional Guidance

Keeping abreast of tax law changes and consulting with a tax professional can simplify the process of understanding tax credits and deductions. The IRS website offers tools like the Tax Withholding Estimator and access to various forms for claiming credits. Nonetheless, personalized advice from a trusted tax advisor is invaluable in maximizing tax credits, reducing tax liabilities, and ensuring adherence to IRS regulations.

In conclusion, understanding the new tax credits for 2024 is essential for maximizing your tax benefits as a new parent. With the enhanced features of the IRS Online Account and revised reporting thresholds, there are several critical updates to consider. By gathering the necessary tax documents, familiarizing yourself with eligibility criteria, and making appropriate adjustments to your withholding, you can streamline the tax return filing process and potentially receive valuable tax credits. Remember to consult with a tax professional to receive personalized guidance and ensure you take full advantage of all available tax benefits.


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