Category: Tax Deductions and Credits

Deductions and credits may be similar but they are far from identical when it comes to your tax return. A tax deduction is a qualifying expense that decreases your taxable income. On the other hand, tax credits allow taxpayers to reduce their tax due to the IRS, dollar-for-dollar. You subtract the amount that the credit is worth from your tax liabilities. If you had to compare the two, a tax credit is more valuable on your tax return. Want to learn more about different credits you are eligible for or tax expenses you can claim? PriorTax tells you about expenses you can claim.

Archive for the ‘Tax Deductions and Credits’ Category

Accurate Tax Filing for Maximum Tax Refund

Posted by admin on February 15, 2024
Last modified: February 16, 2024

Accurate Tax Filing for Maximum Tax Refund for Past Tax affecting the Current Tax Year

Taking a second look at your previous tax returns may lead to a pleasant surprise of a larger tax refund. Whether you filed your taxes independently or with a dedicated Tax Professional for the past three years, PriorTax is here to meticulously assess those past returns and guarantee that no potential tax deductions or tax credits are overlooked for accurate tax filing

How to Find Money Others Miss.

In past tax years, it’s possible that you may have missed out on claiming all the tax credits or tax deductions that you were eligible for, which includes

accurate tax

Missed: Education Tax Credits

As a student or a parent of a student, our primary goal is to ensure that you are making the most out of the benefits provided by the American Opportunity Tax Credit, the Lifetime Learning Tax Credit, and any available tuition tax deductions.

By providing education tax credits, the burden of higher education costs is eased as eligible students and their households see a reduction in their tax obligations. In certain situations, taxpayers may even be eligible for a tax refund.

American Opportunity Tax Credit

With the enactment of the Protecting Americans from Tax Hikes (PATH) Act of 2015, the American Opportunity Tax Credit (AOTC) was solidified as a lasting provision. This tax credit builds upon the foundation set by the Hope Credit, aiming to alleviate the financial burden of education and make college accessible to individuals from lower-income backgrounds.

Lifetime Learning Tax Credit

The Lifetime Learning Credit (LLC) offers a valuable opportunity to non-degree-seeking students throughout their post-secondary education. This credit allows workers to enhance their job skills, ultimately leading to higher earning potential. Unlike the AOTC, the LLC focuses explicitly on reducing income tax for eligible individuals, making it an ideal option for those with tax obligations.

The list of acceptable expenses that qualify for either the Lifetime Learning Tax Credit or the American Opportunity Tax Credit is extensive.

– Tuition After deducting tax-free contributions like scholarships, fellowships, Pell grants, veterans assistance, and employer assistance, the remaining amount of tuition is determined.

– Student fees and expenses required for enrollment

– Books, course-related materials and supplies if it is required to enroll or attend the shcool

– Education such as games, sports, and hobbies or non-credit programs and courses that directly help to improve skills for jobs.

Missed: Inaccurate Tax Filing Status

When it comes to maximizing your tax benefits, choosing the right filing status is crucial. By selecting the optimal filing status, individuals and families can take advantage of various tax credits and deductions.

According to the IRS (Internal Revenue Service), it is crucial to note that accuracy is not always guaranteed. Ensuring that your tax return is correct is essential, as any discrepancies could result in additional taxes, interest payments, or even penalties.

In the event that you have provided inaccurate information on your original return, it is advisable to make amendments. This includes any errors made regarding filing status, dependents, total income, deductions or credits. However, it is important to note that amendments are not necessary for math errors, as the IRS will rectify those themselves.

When it comes to accurate tax filing, the IRS highly recommends that married couples take advantage of the benefits of filing joint tax returns. By choosing to file together, couples can benefit from various tax breaks offered by the IRS. However, there are rare occasions when it may be more advantageous for married couples to opt for separate tax returns.

Missed: Overlooked Earned Income Tax Credit

Working families can receive thousands of additional dollars through the Earned Income Tax Credit (EITC). Factors including income, marital status, and the size of the family determine eligibility for this credit.

Get in touch with a PriorTax dedicated Tax Professional to find all issues for accurate tax filing this year and make tax amendments from past tax years for maximum tax returns.

Get Caught Up on Filing Back Taxes or Past Taxes.

Posted by admin on February 8, 2024
Last modified: February 17, 2024

When it comes to getting up to date on your taxes, is it advisable to file back taxes? It is possible that it is still within your reach to file a tax return for a previous year in order to settle your outstanding balance or retrieve any refunds owed to you. Discover more about why one might consider filing back taxes and the steps involved in initiating this procedure.

Should you File Past Taxes or File Back Taxes?

By submitting past-due tax returns, you have the potential to achieve various benefits. These advantages include the ability to request a refund, avoid penalties and interest associated with late filing and payment, obtain tax return documentation for loan applications, and fulfill the necessary requirements to pay Social Security taxes and qualify for benefits.

Get in touch with a free Dedicated Tax Professional to walk you through filing back taxes from start to finish to avoid any additional penalties.

1. Claim a Refund

Filing a previous tax return can serve the practical purpose of uncovering potential tax refunds owed by the IRS. People often have their federal income taxes deducted from their paychecks, but an excessive amount is withheld occasionally. By submitting a tax return, you may be eligible for a refund that boosts your bank balance.

2. Stop Payment Penalties and Interest from Past Tax Filing

To prevent or reduce penalties, submitting your tax return before the deadline is crucial, regardless of your ability to pay the amount owed. Please file to avoid an additional 5% charge for each month your return is overdue for up to a maximum of five months. Please note that there may be minimum penalty thresholds in place.

In the unfortunate event that you cannot pay your taxes owed on time, the IRS imposes an additional penalty. Should you dutifully file your taxes by the deadline yet find yourself unable to pay the total amount owed, a charge of 0.5% will be applied to the unpaid tax for each month (or part thereof)

Until your outstanding balance is completely settled or the penalty reaches a maximum of 25% of your taxes, the accumulation of these fees will persist. Additionally, the IRS imposes interest on unpaid taxes. Unlike penalties, interest continues to accrue even when the failure to tax file and failure to pay penalties from it.

back tax

3. Prepare Tax Returns When Applynig for a Loan

When seeking certain types of loans, like mortgages or business loans, it is essential to provide documentation of your income during the approval process. To streamline the process, ensure your tax returns are filed before making a loan application.

4. Pay Social Security Taxes for Tax Benefit Qualification

Entrepreneurs who work for themselves are required to fulfill their Social Security and Medicare obligations by submitting their individual tax returns. Through this process, you not only declare your earnings but also become eligible for future Social Security retirement, disability benefits, and Medicare assistance.

How Late Is Too Late?

The IRS highly recommends that individuals file any past-due tax returns for any years that still need to be filed. Generally, the IRS expects taxpayers to file their last six years of tax returns in order to maintain a good standing.

Regrettably, there exists a restriction on the length of time in which one can file a tax return to seek tax refunds and credits. The Internal Revenue Service (IRS) enforces a policy that solely permits the claiming of refunds and credits within a three-year timeframe, counting from the initial due date of the tax return.

You must submit your tax return within three years of the deadline to avoid forfeiting a potential tax refund. This means you will no longer be eligible to claim advantageous tax credits or any extra funds withheld from your salary.

Summary

Filing back taxes for previous years is a possibility that should not be overlooked. However, it is important to note that the IRS typically deems individuals compliant if they have filed their tax returns for the last six years.

In accordance with the stipulations set forth by the IRS, individuals are permitted to claim refunds and tax credits solely within a three-year timeframe from the original due date of their tax return.

When Are 2024 Business Tax Filing Due?

Posted by admin on January 25, 2024
Last modified: January 25, 2024

As you embark on your financial journey in 2024, staying vigilant and informed about various deadlines and responsibilities, such as tax filing and maximizing tax deductions, is crucial when business tax filing.

  • Jan. 16, 2024.: Q4 2023 Estimated Tax Payments Due
  • Mar. 15, 2024.: S Corp. and Partnership tax returns due for the tax year 2023
  • Apr. 15, 2024.: Last day for making 2023 contributions to IRAs and HSAs
  • Apr. 15, 2024.: Sole proprietor and C Corp. tax returns due. Q1 2024 estimated taxes are due.
  • June. 17, 2024.: Q2 2024 estimated taxes due
  • July. 31, 2024.: Tax Form 5500 – 401(k) Retirement Plan Filing deadline
  • Sept. 16, 2024.: Extended calendar-year for S-Corp. and Partnership and  tax returns due for 2023. Q3 2024 estimated tax payments due.
  • Oct. 15, 2024.: Extended sole proprietorship and C Corp. tax returns due. Tax Form 5500 – 401(k) Retirement Plan Extended Filing deadline
  • Dec. 16, 2023.: Q4 2024 estimated tax due for C Corp.
  • Jan. 15, 2025.: Q4 2024 estimated tax due for individuals tax payers
  • Updates and Changes for Business Tax Filing in 2024

As the landscape of tax credits and deductions evolves, it is crucial for both seasoned entrepreneurs and those embarking on a new business venture to stay informed. Familiarizing oneself with the latest updates is essential for accurately filing taxes and maximizing potential benefits before the 2024 business tax deadline.

To make informed decisions regarding your business tax filing in 2024, consult with our free and dedicated tax professionals who will guide you from start to finish for maximum tax refund.

2024 Business Tax Filing

What’s New on 2024 Business Tax Return Filing

New tax regulations are constantly being introduced and updated. As we prepare for the 2023 tax year, it’s important to take note of the key changes that will affect your return. These changes encompass a range of areas, including business meals, expanded credits for small employers’ retirement plans, tax incentives for purchasing clean vehicles, credit transferability, adjustments for inflation, the standard mileage rate for business driving, and the small employer’s health insurance credit.

Business Meals Tax Deduction

Starting in the year 2022, the full tax deductibility of business meals was implemented. However, in 2023, only half of the cost can be tax deducted.

More Tax Credits for Small Company Retirement Plans.

Innovation has taken hold in the realm of financial planning as a plan’s origins have broadened. Moreover, a fresh credit has emerged, focusing on specific employer contributions as an alternative to the traditional deduction.

Tax Credits for Buying New Cars.

The world of tax credits offers various benefits to those interested in purchasing plug-in electric and fuel-cell vehicles. These incentives include the new clean vehicle credit, previously owned clean vehicle credit, and the commercial clean vehicle credit. Each of these credits has its own unique set of eligibility rules and credit limits.

Tax Credit Transferability.

The opportunity to exchange green energy tax credits for cash is an enticing possibility. Take, for instance, the alternative fuel refueling property credit case. This tax credit, designed for installing charging stations, can be transformed into immediate cash through the sale to an interested buyer.

Adjustments for Inflation in 2024 Business Tax Return Filing

Every year, the IRS makes numerous adjustments to various tax items to accommodate inflation. These adjustments significantly impact individuals’ tax brackets, specifically affecting the amount pass-through entity owners must pay on their share of business income. Additionally, cost-of-living adjustments (COLAs) have an influence on several other aspects relevant to businesses. These include the standard mileage rate for business driving, the small employer’s health insurance credit, the gross receipts test, the Sec. 179 tax deductions (first-year expensing), the limitation on losses for non-corporate taxpayers, and the qualified business income (QBI) tax deduction.

Standard Mileage Rate from Driving for Business

Regarding business driving, the standard mileage rate plays a crucial role. It is worth noting that if one doesn’t deduct the actual expenses, the IRS-set rate for the year 2023 stands at 67¢ per mile.

Small Employer’s Health Insurance Tax credit.

In 2023, the adjusted amount for the Small employer’s health insurance credit, which is partly determined by wages, is now available.

Gross Receipts Test.

The eligibility assessment, commonly known as the gross receipts test, is pivotal in various aspects of a business’s financial operations. It determines the suitability of utilizing the cash method of accounting, the need for inventory accounting, and other specific purposes.

Limitation on Losses for Non-Corporate Taxpayers. 

The current year’s restriction on losses for non-corporate taxpayers has been raised, allowing excess losses to accumulate as part of a net operating loss for utilization in future years.

Qualified Business Income (QBI) Tax Deduction. 

With the start of 2023, a significant increase in the taxable income threshold could limit or prohibit the Qualified Business Income (QBI) deduction.

Sec. 179 Tax Deductions (first-year expenses).

The option of immediately deducting the cost of machinery, equipment, and other eligible property placed in service before the end of 2023 instead of gradually depreciating it is referred to as the Sec. 179 deduction or first-year expense. This tax deduction allows businesses to tax deduct up to the 2023 limit of $1,160,000.

Best Tips for 2024 Efile

Posted by admin on January 11, 2024
Last modified: January 9, 2024

Tax season has arrived once again, bringing with it the anticipation of receiving a sizable tax refund. Get ahead of the game and 2024 Efile your taxes right now to secure your spot for an Efile tax refund. While the IRS has yet to start accepting 2024 Efiled tax returns, PriorTax is here to assist you. Rest assured that we will securely store your completed taxes, send them to the IRS, and inform you when they open for e-file. To help you stay motivated, we have compiled five handy tips to give you a head start on getting your tax refund.

Last year, the average tax refund amounted to over $3,000, a welcome boost to many individuals’ finances. To assist you in preparing for this tax season, we are pleased to announce that PriorTax is now open and ready to receive your 2024 Efile Tax returns.

1. Prepare your Tax Documents to 2024 Efile in a Single Shot

When it’s time to file your taxes, gathering all your necessary documents, forms, and receipts in a single location is important. This will ensure that you don’t notice everything important. If you work for yourself, keeping an eye out for Form 1099-NEC and other income reporting forms is incredibly crucial.

Before you begin the filing process, it’sgathering all your necessary forms and receipts for deductible expenses is essential. To make this task more engaging, here are five valuable tips to give you a head start on maximizing your tax refund:

One helpful suggestion is to have a designated folder beside the area where your mail is delivered. By doing this, you will be able to keep W-2s, 1099s, and other important documents conveniently in one place. Additionally, it is always wise to keep a copy of your previous year’s tax return handy, as it may be necessary to refer to your adjusted gross income from the prior tax year when filing.

As a valued PriorTax customer, you can expect the seamless transfer of your adjusted gross income to your current tax filing. Our dedicated free Tax Professional team is here to guide you through the entire process, ensuring that you understand the necessary steps and efficiently organize your documents according to your unique circumstances.

2024 Efile

2. Remember What You Did Last Year

Recall the events and actions of the previous year. It is essential to ensure you have proper documentation for expenditures such as donations to charitable organizations and medical expenses when you commence the process of filing your taxes. These supplementary costs can result in a more substantial refund on your taxes.

3. Get your 2024 Efile Taxes Done

Getting your taxes done has never been easier than with PriorTax. No matter your circumstances or preferred filing method, PriorTax is here to assist you every step of the way. Whether you choose to tackle your taxes independently, receive guidance from a Tax Professional, or entrust them to a dedicated tax professional who can provide assistance either over the phone or in person, PriorTax ensures a seamless experience from start to finish.

4. Easy 2024 Tax EFiling with PriorTax

For individuals who have uncomplicated tax returns, with few credits and no need for additional forms or schedules, there is an opportunity to file federal and state taxes for maximum return using PriorTax with our Dedicated Tax Professional. Approximately 37% of taxpayers meet the criteria for eligibility.

Starting November 30, 2023, and continuing until March 31, 2024, individuals who possess a straightforward W2 or Form 1040 tax return, devoid of complex credits and without the need to include supplementary forms or schedules, will have the opportunity to obtain complimentary guidance from a tax professional as they navigate the tax process.

Intended for individuals who need to file tax returns and are eligible for different tax credits, PriorTax offers a user-friendly platform that simplifies the process. Whether you have to submit additional forms or schedules or not, our platform supports tax filing Form 1040. Our services cover uncomplicated returns which involve W-2 income, a small amount of interest, and dividend income that may or may not require the inclusion of Schedule B, the standard tax deduction, Earned Income Tax Credit,  Student Loan interest, and Child Tax Credit

5. Don’t Wait to 2024 EFile your Taxes

It is essential not to delay in tax filing your taxes as the average direct deposit tax refund exceeded $3,000 last year. It is crucial to note that choosing to 2024 Efile tax with direct deposit ensures the fastest receipt of your federal tax refund. According to the IRS, nine out of 10 taxpayers who 2024 Efile tax with direct deposit can expect to receive their federal tax refund within 21 days or even less.

No matter which steps you took in the previous year, PriorTaxTax is here to ensure they have a significant impact on your tax returns. Whether you prefer handling your taxes independently or entrusting PriorTax’s dedicated Tax Professionals with the task, rest assured that we will maximize your tax refund and ensure you with every dollar you are entitled to.

2024 Tax Guide for Unemployed Income Tax Filing

Posted by admin on December 28, 2023
Last modified: December 28, 2023

In times of employment uncertainty, facing the challenges alone can feel daunting. However, you can use our expertise and guidance to navigate this journey. Our dedicated team of free Tax Professionals is ready to provide free assistance and valuable insights on various aspects, ranging from financial management to tax implications. Discover a wealth of tax filing related information on unemployment income tax and unemployment benefits, insurance, and eligibility through PriorTax. You do not have to face unemployment alone; we are here to support you every step of the way.

Currently, the state of unemployment in the United States remains stagnant, with approximately 6.3 million individuals facing joblessness and the national unemployment rate standing at 3.7 percent, primarily due to layoffs or temporary work suspensions. Despite the passage of time since the beginning of 2022, these statistics have yet to make minimal progress, leaving a significant portion of the American population grappling with financial difficulties.

For those who find themselves in the position of receiving unemployment benefits, it’s only natural to have questions regarding the tax consequences that come along with it. To shed some light on the matter, here is some essential information you should be aware of.

How to Calcaulate Tax on Unemployment Income

Unemployment income is often subject to taxation and must be reported as part of your annual income, particularly if you have additional sources of income. Certain states may also consider unemployment benefits as taxable earnings.
When the tax filing season arrives, individuals will be provided with Form 1099-G, displaying the total sum of their unemployment benefits. This crucial document also reveals any federal taxes that were tax deducted from their unemployment compensation.

unemployment income tax

Tax Guides on Unemployment Income

Tax Deduct Federal Taxes.

To ensure a smooth tax filing experience, opt for having federal tax deducted from your unemployment income. By doing so, you can avoid any unexpected surprises when the time comes to tax file your taxes on your unemployment income.

By completing a Form W-4V Voluntary Withholding Request and submitting it to the benefits disbursing agency, taxpayers can withhold a maximum of 10% from their unemployment benefits. In the scenario where voluntary tax withholding is not selected, or the amount withheld is insufficient, taxpayers still have the alternative of making estimated tax payments.

Adjust your withholdings.

When it comes to securing employment, it is crucial to consider your unemployment benefits as you complete the W-4 withholding certificate for your employer. This becomes particularly significant if you still need to deduct federal taxes from your unemployment income.

When paying estimated taxes for Self-Employed have Unemployment into Account

When it comes to individuals working as independent contractors, engaging in side gigs, or operating as freelancers, it is important to remember that any unemployment income received will be combined with your self-employment net income and may be subject to taxation. As you prepare to fulfill your obligations regarding estimated quarterly taxes, it is worth considering the inclusion of your unemployment income, especially if you have yet to have federal taxes withheld from those specific earnings.

New tax credits and new tax deductions in 2024.

Discover the potential benefits of recently discovered new tax credits and new tax deductions. Some tax credits and tax deductions are specifically tied to income, and you may not have been able to take advantage of them previously because of your higher income. However, now you may be eligible for these benefits. Two noteworthy examples include the Earned Income Tax Credit and The Saver’s Credit. Surprisingly, according to the IRS, a significant portion of individuals, approximately 20 percent, overlook both of these advantageous tax credits.

Earned Income Tax Credit

In the realm of tax benefits, the Earned Income Tax Credit stands tall as a significant tax credit that is calculated based on an individual’s income. Should an individual experience a decrease in their income during the year 2023 due to the unfortunate circumstance of lost wages, they may find themselves eligible for the EITC.

Saver’s Tax Credit

Introducing the Retirement Rewards Tax Credit, a lucrative opportunity for all those who have diligently invested in their future. In light of the unprecedented financial setbacks experienced in 2023, individuals who find themselves within the designated income limits due to unexpected wage reductions may now reap the benefits of the Retirement Rewards Tax Credit.

Child and Dependent Care Tax Credit

The possibility of claiming the Child and Dependent Care Tax Credit arises when an individual hires someone to provide care for their child while they are employed or actively seeking employment. This particular tax credit becomes more relevant for those with a lower income.

In the upcoming year of 2023, a valuable tax credit is being offered which is nonrefundable. This tax credit allows individuals to claim up to 35% of their expenses for various dependent situations.

Rest assured, our expert team of PriorTax Tax Professionals is here to guide you when it comes to understanding the intricacies of tax regulations. By asking a series of straightforward questions tailored to your unique circumstances, we will determine the specific tax deductions and tax credits available to you.

2024 Tax Changes May Generate Better Tax Refunds

Posted by admin on December 21, 2023
Last modified: December 21, 2023

In the upcoming year of 2024 tax filing, prepare for a pleasant surprise as significant tax modifications are set to take effect. Brace yourself for potential financial gain, as your paycheck has the potential to grow generously if you find yourself in a lower tax bracket.

In a recent declaration, the IRS unveiled various significant modifications to the tax code. These alterations can potentially affect the amount of tax deducted from your earnings, causing potential implications for specific individuals.

In anticipation of the upcoming year, 2024 tax filing promises adjustments to the federal income tax brackets as well as an increase in the standard deduction. This significant modification is a direct response to the persistently soaring inflation that has kept the prices at an elevated level throughout the entirety of the current year.

Every year, the IRS implements modifications to the tax code as a means to accommodate inflation and prevent the occurrence of “tax bracket creep.” This phenomenon has the potential to push individuals into higher tax brackets despite the impact inflation has on their wages.

In the year 2024, it is possible that your chances of moving up to a higher tax bracket due to increased income could be mitigated by incorporating inflation into the tax code. It could result in a drop to a lower tax bracket. If your annual income remains steady from 2023 to 2024, you could see a slight increase in your take-home pay each payday.

How Changes in 2024 Tax Code May Affect Your Tax Refund

If the IRS increases federal income tax brackets, individuals may find themselves in a lower tax bracket compared to the previous year, especially if their income remains unchanged.

In 2023, let’s say you earned $47,000 and found yourself in the 22% tax bracket. However, fast forward to 2024; if your income stays the same at $47,000, you’ll now find yourself in the 12% bracket. This change in tax bracket implies that next year, you’ll be liable for a reduced amount of federal tax and will see a smaller deduction from your paycheck.

In the upcoming year of 2024, if your income surpasses that of 2023, the extent to which your earnings have grown will dictate your position. There exists the possibility that even with the recent alterations, you might still find yourself fitting into a lower tax bracket.

Regardless of the situation, it is crucial to acknowledge that in the current state of lingering inflation, the impact of high prices is being felt in various ways. Thus, even if one transitions into a lower tax bracket and receives a slightly larger paycheck in the upcoming year, inflation has already eroded the value of expenses for basic necessities such as housing, transportation, and groceries.

2024 New Income Tax Brackets

When it comes to calculating the amount of taxes you owe in a specific tax year, your federal income tax bracket plays a significant role. This bracket determines the percentage of your income that will be taxed, excluding any standard or itemized deductions.

2024 tax filing

2024 New Standard Tax Deduction

In the upcoming year of 2024, a notable change has been made to the standard tax deduction for single filers. This adjustment has resulted in an increase of $750 compared to the previous year, bringing the tax deduction to a total of $14,600. Similarly, married individuals who file jointly will also experience a change in their standard deduction for the upcoming tax season.

2024 standard tax deduction

When it comes to tax returns, many individuals opt for the standard deduction, which effectively lowers their taxable income. This is especially true for those who earn wages from a single employer as a W-2 employee, as it often allows them to maximize their tax refund. However, itemizing deductions may be a more suitable approach for self-employed individuals or those with particular deductions in mind.

Other Beneficent 2024 Tax Filing Updated

Starting next year, there will be a range of tax adjustments that have the potential to boost your monthly income. Those who are beneficiaries of Social Security will be pleased to know that a 3.2% cost-of-living adjustment is slated to take place in 2024. Furthermore, due to the fortuitous timing of New Year’s Day falling on a holiday, recipients can anticipate their first augmented SSI payment right around the end of December.

To assist taxpayers in maximizing their deductions and credits, the IRS unveiled many updates and enhancements for the upcoming year of 2024. Among these revisions are:

  • An amplified cap for the Earned Income Tax Credit.
  • Refinements to the gift tax exclusion.
  • An expansion of the foreign earned income exclusion.

PriorTax free Dedicated Tax Professional will keep you up to date and walk you through navigating through 2024 tax filing for your maximum tax refund from start to finish.

2024 Tax Filing

Posted by admin on December 14, 2023
Last modified: December 14, 2023

In anticipation of the upcoming 2024 tax season, it is crucial to proactively prepare for any potential alterations that could affect your tax filing process. Whether you are a seasoned tax filer or venturing into the world of tax filing for the first time, navigating the tax season can be quite daunting.

To ensure a smooth and stress-free experience for the upcoming tax season in 2024, we have curated this indispensable handbook. It will equip you with the necessary information to accurately and efficiently file your tax returns for the year 2023.

2023 Tax Filing Important Dates and Deadlines 

Marking the beginning of the 2024 tax cycle, January 23, 2024, signifies the commencement of the official new tax season.

If the tax deadline is approaching and you cannot file your taxes, it is crucial to take the necessary steps to request an extension. One way to do this is by submitting IRS Form 4868, which is known as the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

Please be aware that while this affords you extra time for tax filing purposes, it does not grant you an extension for tax payment. Should you be unable to settle your taxes in full by April 15, it is crucial to establish a payment plan with the IRS to prevent any detrimental consequences, including wage garnishment or the imposition of a tax lien.

2024 tax filing

2024 Tax Law Changes and Updates

The upcoming 2023 tax return brings numerous modifications and revisions that might affect your financial situation. Among these alterations, the elevated standard tax deduction is a prominent highlight, as it undergoes regular adjustments to accommodate inflation rates. Individuals filing as single will witness a noteworthy increase of $900, resulting in a new standard deduction of $13,850.

Married individuals filing jointly can take advantage of a higher standard tax deduction for the 2023 tax year. This year, their standard deduction will see a significant increase of $1,800 compared to the previous year, totaling a generous $27,700.

Apart from the rise in the standard deduction, a few other factors could potentially influence your tax situation.

2024 Child Tax Credit

In the upcoming tax year of 2023, the Child Tax Credit will revert to its pre-COVID regulations, just as it did in the previous year of 2022. Consequently, the tax credit will no longer be entirely refundable, only allowing for a refund of up to $1,600.

To be eligible for the full credit, individuals must have a modified adjusted gross income (MAGI) equal to or less than $200,000 ($400,000 or less for those who are married and filing jointly).

2024 Income Tax Credit

In 2024, individuals filing taxes for the 2023 tax year can avail of the Earned Income Tax Credit (EITC), which ranges from $600 to $7,430. The amount eligible for this credit is determined by income level, number of dependents, and tax filing status. If individuals do not have qualifying children, they must be between the ages of 25 and 65 to claim the EITC.

Number of Qualifying Children and Maximum Credit Amount:

  • $600 Max Tax Credit with 0 Children
  • $3,995 Max Tax Credit with 1 Child
  • $6,604 Max Tax Credit with 2 Children
  • $7,430 Max Tax Credit with 3+ Children

2024 Annual Gift Tax

In the upcoming year of 2023, individuals can take advantage of the 2024 annual gift tax deduction, allowing them to gift up to $17,000 ($34,000 if married) without incurring any taxes.

Health Savings Account (HSA) in 2024

In the upcoming tax year of 2023, individuals are granted the opportunity to contribute to their Health Savings Account (HAS) up to a maximum of $3,850. This equates to a $200 increase compared to the previous year. For those who have chosen family coverage, the contribution limit is set at $7,750.

The benefits of HSAs are threefold when it comes to taxes:

  1. Individuals can deduct 100% of their contributions from their tax burden.
  2. Any interest earned within the HSA remains tax-deferred unless it is used for non-medical expenses.
  3. When funds are withdrawn for eligible medical expenses, they are entirely tax-free.

2024 IRA & 410(k) Contributions Tax Deduction 

In the upcoming year of 2023, individuals who contribute to their 401(k) plans will be thrilled to learn that the annual deferral limits have experienced a significant jump, with up to $2,000 to increase from 2022.

The contribution limits for taxpayers aged 50 or above have been revised, allowing them to increase their investments in traditional and safe harbor 401(k) plans. Specifically, individuals in this age group can now contribute an extra $7,500, a notable increase from the previous year’s limit of $6,500.

In the realm of individual retirement accounts, specifically the traditional and Roth IRA, it is important to note the contribution limit for the year 2023. This limit stands at $6,500, although individuals who have reached the age of 50 or older are allowed to contribute up to $7,500. However, it is crucial to be aware of potential adjustments to your contribution amount in the case of a Roth IRA. These adjustments are dependent on your modified adjusted gross income (MAGI)

2024 Student Loan Interest Tax Deduction

With the resumption of student loan payments and the return of accruing interest, there is a potential opportunity to claim a deduction of up to $2,500 on your 2023 tax return. To be eligible for this deduction, individuals must have a MAGI of less than $90,000 (single, qualifying widow(er), or head of household) or $180,000 if they are married and filing jointly.

Step-by-Step Guide to Filing Taxes in 2024

Once you have assembled the essential paperwork, it is crucial to adhere to the comprehensive tax filing guide provided below. Following these step-by-step instructions will ensure a seamless and accurate procedure.

Opt for a tax preparation approach like utilizing tax preparation software or seeking advice from a tax professional. Should you opt for the traditional paper tax return, it is important to remember that the processing time may extend up to six months. E-filing is strongly recommended whenever feasible.

To ensure the accuracy and completeness of your tax return, it is important to input all relevant information into PriorTax. Remember to sign and date your return and attach any necessary tax documents, forms, and schedules if filing by mail. Remember, the deadline to submit your tax return is April 15.

When managing your taxes, don’t hesitate to contact the experienced Tax Professionals at PriorTax. PriorTax understands the importance of affordable tax preparation for individuals and small business owners, offering services tailored to your specific needs. Additionally, we are dedicated to assisting you in resolving any tax debt issues you may face. Take the first step towards financial peace of mind by connecting with your dedicated Tax Professional, free of charge.

2023 Year End Charitable Donations for Tax Filing

Posted by admin on December 7, 2023
Last modified: December 7, 2023

Planning your 2023 Year End Charitable Donations for Tax Filing

Towards the year’s close, many individuals are looking towards charitable donations as part of their financial strategy. From November to December, philanthropy takes center stage as people use this time to make donations that could prove essential for charities reliant on contributions from individual donors. The two months leading up to the end of the year is typically referred to as “the giving season,” and it provides a valuable opportunity for those wishing to give back.

The end of the year is often a time of generosity and showing appreciation for all that has been bestowed upon us. A survey conducted by Fidelity reveals that three out of five people plan to participate in philanthropic activities before the year’s end. Charitable giving is one such avenue for Americans to assist those with less luck.

To ensure the charity you select is authentic, verify it has obtained 501(c)(3) status from the Internal Revenue Service. This information can easily be found by consulting the IRS’s database of tax-exempt organizations or obtaining help from a PriorTax Tax Professional. In addition, many nonprofits will advertise their 501(c)(3) standing on their website or other publications.

charitable donation

Increasing Necessity for Charitable Donations

This year, the deficit is very significant due to the ongoing economic repercussions of COVID-19. Consequently, many unemployed individuals have sought assistance from food banks and other charitable organizations. Simultaneously, due to social distancing regulations, revenue has diminished for various entities that typically rely on in-person contributions, including faith groups and art organizations.

Making charitable donations may be a way to lessen your tax responsibilities, but there are alterations in the tax code that affect how these contributions are factored in. Here’s an overview of what you need to understand about the charitable donations tax deduction.

Charitable Donations in 2023

The Tax Cuts and Jobs Act of 2017 has enabled generous individuals to reduce their taxable income in 2018 through 2025 potentially. For cash donations, donors may be able to subtract up to 60% of their adjusted gross income (AGI) when giving to certain organizations. Additionally, those donating stock can enjoy a reduction of 30% off their AGI for such contributions.

Charitable donations by individuals are not limited to nonoperating private foundations; they can also include public charities and other private foundations. Should the qualifying cash contributions exceed the 60% ceiling for the given tax year of the donation, it may be carried forward to future years for up to five years.

Regarding charitable giving, it’s not only about the act of giving but also considering how that action fits into your tax strategy. As a reminder, the Internal Revenue Service (IRS) usually releases its annual inflation adjustments in the late fall for the upcoming year. It’s important to keep this information in mind when planning out your donations and other taxation decisions.

As the end of the year approaches, it’s a great opportunity for individuals to consider their tax situation and charitable giving. It is important to properly organize your charitable giving in order to maximize tax savings. Here are a few steps to consider when doing so:

Secure your Receipts

For those looking to get the tax deduction associated with charitable donations, it is important to make sure that you possess a receipt for all contributions. This applies no matter which form of donation you choose on December 31st, whether by cash, check, credit card, or even non-cash items such as clothing and furniture. Unfortunately, any kind of anonymous giving like coins thrown into a collection bucket does not qualify. It is essential to have proof to be able to use the donation as an offset on your taxes when filing with the IRS.

Check the charity’s policy before you load up the trunk.

When looking at eligible donations for tax deductions, the condition of the items is a significant element. The IRS does not indicate any specific prices related to the quality of the items, but charities do. Additionally, there are other regulations stipulated by the IRS concerning such donations. During the 2020 pandemic, many organizations ceased accepting physical goods as gifts; however, some have restarted retaking them. Be sure to confirm with your desired charity before delivering any goods.

Itemize your Charitable Donations for Tax Filing 

The government’s tax code makes a significant change for 2023, with the cash deduction rising to 60% from 50% while also increasing the standard deduction for married couples filing jointly to a total of $27,700. However, itemizing these deductions has become more difficult, and limits have been placed on how much homeowners can deduct in terms of real estate taxes and mortgage interest.

The combined total deduction rate for income, state, and property taxes has a maximum of $10,000. Because of these changes, it is now more difficult to surpass the standard deduction threshold in any given year through charitable contributions alone. Sax revealed that couples who take full advantage of the $10,000 state and local tax deductions and lack mortgage interest would have to donate at least $15,900 to itemize their deductions.

When filing your taxes, you can only claim a charitable donation deduction if you decide to itemize. To qualify for itemizing, add up all of your deductible expenses and make sure they exceed the standard deduction set by the IRS for 2023.

Taxpayers seeking to itemize their deductions in 2024 should note the following amounts: single taxpayers and married couples filing separately can deduct up to $13,850; those who file as head of household have a threshold of $20,800, while married couples filing jointly and surviving spouses may itemize up to $27,700.

When it comes to itemizing deductions for the 2024 tax year, the specifics are as follows: those who file single or married filing separately must have an amount of more than $14,600; meanwhile, head of household taxpayers must surpass a figure of $21,900; lastly, married filing jointly and surviving spouses need to be above $29,200.

Bunching Donations for Maximizing your Tax Refund

He advised those who were philanthropic and had the means to do so to bunch their donations. This would mean combining two years’ worth of charity contributions through money or stock giving. Doing this could help the donor slip into a lower tax bracket.

Qualified Charitable Distributions (QCD).

Retirees who don’t need their IRA funds can take advantage of the Individual Retirement Account (IRA) Charitable Rollover, which allows them to make tax-free contributions of up to $100,000 directly from their IRAs. This is a qualified charitable distribution and simplifies the process for those interested in donating to charities.

Whenever your need advise with Charitable Donations for Tax filing, find your dedicated tax professionals at PriorTax to walk you trough from start to finish for free.

8 Very Commonly Overlooked Tax Deductions and Tax Credits

Posted by admin on November 30, 2023
Last modified: November 30, 2023

Taxpayers tend to overlook certain tax deductions, tax credits, and even tax exemptions that can help them pay less in taxes. Understanding these available tax breaks is important so that you are not leaving money on the table come tax season.

People only sometimes take full advantage of the possible opportunities to reduce tax bills. The ever-changing landscape of federal and state laws can make it challenging to keep up with all the available deductions, credits, and exemptions. Here, we have gathered 16 overlooked options for saving money on taxes – so if you qualify for any of these reliefs, you could be leaving more cash in your wallet this year!

Most importantly, reach out to locate your free dedicated tax professional from PriorTax to walk you through your tax filing from start to finish. Get in touch with your tax professional now.

Gambling Losses Tax Deduction

The Internal Revenue Service (IRS) allows a tax deduction for gambling losses for those who choose to itemize deductions. However, these write-offs are only available up to the amount of any gambling wins that were declared as taxable income. Additionally, it’s important to recognize that other forms of wagering can be taken into account when claiming deductions related to gambling, such as non-winning bingo tickets or lottery expenses.

If you believe that this tax deduction is the right move for you, be certain to save all of your gambling receipts – such as losing tickets. The IRS also recommends to keep a daily log of your gambling activity. This should include details like the date and type of bet, where it was placed, the names of those with you when wagering, and how much was won or lost in each instance.

tax deductions

Child and Dependent Care Tax Credit

The financial burden of childcare can be difficult to bear for many families. Fortunately, the child and dependent care tax credit is available to help lessen this expense’s impact on a household budget.

If your family requires childcare for children under 13 years old or a disabled dependent of any age, 2022 could be the time to claim a non-refundable tax credit. This credit can provide up to 35% or $3,000 of qualifying expenses for one child and $6,000 maximum for two or more qualifying children.

The child and dependent care tax credit can provide financial assistance to those paying for the cost of taking care of dependents. This could include elderly parents who are claimed as dependents on an adult child’s tax return, for example. In such cases, any related expenses may qualify for the credit above.

State Income Tax Refund

Taxpayers Can Avoid Reporting State Income Tax Refund. As outlined on Schedule A of the IRS Form 1040, many individuals can avoid including their state income tax refund when filing their federal income tax return. This is because when you claim the standard deduction for state and local taxes on your most recent federal tax return, that refund isn’t considered taxable.

When reporting a state income tax refund, you should not include it on your tax return if you did not itemize deductions for the year you received the refund. This avoids making an unnecessary report of the income. But suppose you are still determining whether the Form 1099-G related to your state income tax refund is taxable or not. In that case, consulting a professional might be wise to determine its taxable status.

Out-of-Pocket Charitable Tax Deductions

Giving to Charity Can Be Rewarded. You may be aware of the possibility of deducting larger charitable gifts that you made, such as by check or payroll deductions. However, it is worth noting that lesser amounts can still make a difference and should not be overlooked. In addition, you can also claim out-of-pocket expenses incurred while working for a charitable organization.

When it comes to charitable contributions, even something as simple as providing the ingredients for a meal prepared for a soup kitchen run by a nonprofit organization or buying stamps for a school’s fundraising effort can qualify. In other words, spending money supporting these causes is just as valid and beneficial to the cause as an outright donation.

It is important to maintain documentation of your charitable contributions. If the total value of your donations is $250 or higher, you must acquire a receipt verifying the contribution from the charity in question. In addition, for travel-related expenses associated with charitable activities, you are eligible to write off 14 cents per mile as well as parking fees and tolls.

State Sales Taxes

A deduction for state sales taxes can be a real boon for those who reside in states that don’t levy income taxes. If you opt to itemize deductions, you have the option of deducting either state taxes or your state and local sales taxes, whichever one offers the best financial relief.

Those who pay state income taxes can write off sales taxes in certain situations. The Internal Revenue Service (IRS) has a calculator that can help residents of different states figure out how much they can deduct, considering their income and applicable state and local tax rates. For instance, if you have made any large purchases like a vehicle, boat, or airplane, the calculator also includes the taxes paid on these items when figuring out total deductions for sales tax.

Regarding tax deductions, there is a limit for the amount of sales and property taxes that can be claimed – $10,000 annually ($5,000 if filing separately). Unfortunately, this amount includes both your local sales tax deduction and your local property taxes.

State Tax Paid for Previous Year

If you had to pay tax on your 2021 state income taxes, the cost is eligible to be used as a deduction when filing your 2022 federal return. Not only does this include the amount of taxes owed when filing, but it also takes into account any state income taxes taken out of your paycheck throughout the year or paid in quarterly estimated payments.

Additionally, the taxes withheld from your paycheck or paid in quarterly estimated payments should also be included. However, note that the deduction for state and local taxes is limited to $10,000 annually ($5,000 if married filing separately).

Dependent Tax Credit

You may not be aware, but claiming a dependent on your return can save you some money come tax time. The Dependent Tax Credit offers $500 for dependents who cannot qualify for the Child Tax Credit – such as children over 17 years old or elderly relatives in need of care in your home. So, if you have someone depending on you, remember to take advantage of this credit when filing!

It is crucial to be aware that for the 2022 tax year, the total of both the child credit and credit for other dependents may only be available when your adjusted gross income is $200,000. If filing jointly as a married couple, this number goes up to $400,000.

2024 New Tax Brackets

Posted by admin on November 16, 2023
Last modified: December 21, 2023

Significant Changes for 2024 New Tax Brackets.

The Internal Revenue Service has taken steps to ensure that the new 2024 tax brackets reflect the current consumer price index. This 5.4% upward adjustment is especially notable compared to the 7% increase from last year, one of the most considerable adjustments the IRS has made in recent years. The new limits for 2024 will be set according to this formula and should accurately account for inflation developments in our current economy.

In anticipation of 2024, taxpayers should be aware of new income limits for IRS tax brackets. To account for inflation, these thresholds have been adjusted from previous years, which may provide a much-needed financial break to those filing taxes in 2024. Here’s how to keep up with your bracket.

Year after year, taxpayers are affected by changes to tax brackets and other areas, such as retirement fund contribution limits due to inflation. This variation helps prevent so-called “bracket creep,” which is when a person’s earnings puts them in a higher income tax bracket while their basic standard of living remains unchanged. To combat this situation, annual adjustments are made by the Internal Revenue Service (IRS).

Taxpayers may benefit from the higher thresholds, as more of their taxable income will likely fall into a lower tax bracket. Therefore, these earners can get some respite from taxes when filing their 2024 taxes in early 2025.

New Tax brackets for the 2023 tax year, taxes which are due in 2024

2024 tax filing

The New 2024 Tax Brackets

For tax year 2024, U.S. taxpayers can expect an uptick in their federal income taxes. With seven rates set by the 2017 Tax Cuts and Job Act, people filing either individually or as married couples will see a 5.4% increase in their brackets across each of these bands: 10%, 12%, 22%, 24%, 32%, 35% and 37%.

The New 2024 Tax Brackets for married couples filing jointly

Filing jointly as a married couple in the United States has distinct tax consequences; depending on one’s taxable income, various rates apply. For instance, any income up to $23,200 would be taxed at 10%, while any above $731,200 would see the highest rate of 37%.

When it comes to taxes in the United States, there often needs to be more understanding about how they are calculated. Contrary to popular belief, the highest tax rate an individual may be subject to isn’t applied to every dollar of their income. Instead, progressive tax rates are used, which means that each tax bracket a person falls under will have its applicable rate.

For the 2024 new tax bracket, the federal government has shifted some of taxpayers’ income into lower tax brackets. For instance, single filers with taxable income up to $11,600 will pay 10% in taxes that year – a full $600 more than they would have paid in 2023 when the same bracket was limited to the first $11,000.

2024 New Tax Brackets for Single Filers

In order to keep up with inflation, U.S. tax law dictates that income limits for each bracket must increase annually. As of this year, those limits have gone up by 5.4%.

The marginal rate is the maximum taxation that you are liable for. However what counts is the effective tax rate, which encompasses all of the taxes imposed on different parts of one’s income. Essentially, this amount reflects a person’s actual rate of taxation.

The new 2024 tax brackets for head-of-household filers

For head-of-household filers, their 2024 tax brackets have been established. Individuals filing taxes as a head of household will face a 10% rate on their first $16,550 taxable income. Any income above that threshold will be taxed at 37%, beginning at $609,350.

2024 New Tax Standard Deduction

As of 2024, taxpayers will see an increase in their standard deduction, according to a report from IRS. Specifically, married couples filing jointly will see an extra $1,500 – bringing their total up to $29,200. This is a boost of 5.4%.

For the upcoming tax season, taxpayers who are unmarried and filing separately will receive a standard deduction of $14,600 – an improvement of $750 from last year. Meanwhile, heads of households can count on a boost in their standard deduction to $21,900 – up by $1,100 compared to 2019 taxes.

How to Determine Your New 2024 Tax Bracket

When it comes to taxation, understanding your marginal tax bracket is crucial. You’ll need to calculate your highest taxable income as accurately as possible to do this.

Consider a married couple bringing in an annual gross income of $150,000. After subtracting the 2024 standard deduction, they are left with taxable income worth $120,800. Therefore, the marginal tax rate applicable to them would be 22%.

However, their effective tax rate is much lower:

When it comes to taxes, individuals get a break when it pertains to their first $23,200 of income. While their effective tax rate is significantly lower than average, people who make between $23,200 and $94,300 will still be expected to pay 12%, amassing a total of $8,532 in taxes. Those with incomes ranging from $94,300 to $120,800 would be lucky enough to enjoy a much lower effective tax rate. For this bracket, taxes amount to 22%, which adds up to $5,830. Together, their federal income taxes would come to $16,682 – an effective rate of 14%.

Higher FSA, HSA Limits in 2024

In an effort to help taxpayers cover medical expenses, new regulations have been issued by the IRS, increasing limits for tax-advantaged accounts. Such accounts provide people with financial assistance when paying for related costs.

The Internal Revenue Service announced that in 2024, the limit for Flexible Spending Accounts (FSAs) will be increased to $3,200 from the current level of $3,050. These accounts allow individuals to set aside pre-tax dollars, which can then be used to pay for short-term health care expenses.

IRS recently announced modified limits for contributions to Health Savings Accounts (HSAs) for those with a high-deductible health care plan. Single taxpayers will be able to contribute up to $4,150 in 2024 – an increase of 7.8% from present limits. Similarly, families now have a contribution limit of $8,300 – a rise of 7.1%.

Individuals aged 55 and over can add an extra $1,000 to their health savings accounts (HSAs), a figure that remains unchanged from the previous year.