The deadline for filing your federal income tax return for 2022 is April 18, 2023. As you prepare to file your taxes, it’s time to revise the current guidelines to ensure you comply with IRS requirements and get the maximum income tax credit. Here’s an overview of what you need to know to tackle the 2023 federal tax season.
Certain Tax Credits Go Back to Pre-pandemic Levels
During the COVID-19 crisis, the IRS issued several tax breaks that allowed eligible taxpayers to collect higher tax refunds. Now, important tax credits like the EITC (Earned Income Tax Credit), CTC (Child Tax Credit), and CDCTC (Child and Dependent Care Tax Credit) return to 2019 levels.
For affected taxpayers, this means a significantly lower refund in the 2023 federal tax season compared to last year. For example, taxpayers who collected a Child Tax Credit of $3,600 for 2021 would receive $2,000 for 2022. Additionally, the IRS ends above-the-line charitable donation tax deductions for taxpayers who opt for a standard deduction.
New Reporting Rules for Third-party Payments
For the 2023 federal tax season, the IRS changed its reporting rules for transactions via third-party networks like PayPal and Venmo. Until last tax year, only taxpayers who received over 200 third-party payments worth above $20,000 annually had to fill out Form 1099-K (Payment Card and Third Party Network Transactions).
Starting this year, the threshold for Form 1099-K is only $600. This change primarily affects freelancers, entrepreneurs, small businesses, and anyone who routinely collects payments for goods and services via Venmo, PayPal, and other digital payment networks. Please note that this change doesn’t alter the definition of taxable income; for example, a gift from your parents or reimbursement for dining out from a friend doesn’t count toward the reporting threshold.
Make Sure You Claim Your EITC and Other Eligible Credits
With the numerous changes in IRS policy, many taxpayers may overlook credits they’re eligible for, like the Earned Income Tax Credit (EITC). The EITC could allow you to collect a tax return or reduce your tax debt if you owe back taxes. Claiming EITC is open to single individuals and married couples, whether or not they have children, provided they earned at least some money through a paying job in 2022.
Adults aged 25 to 64 without children may get a maximum credit of $560, while adults raising children may collect an EITC up to $6,935, depending on their income and family size.
Keep Your Identity Safe During the 2023 Federal Tax Season
Filing taxes online is quick, convenient, and secure as long as you protect yourself against tax scams and identity theft. Tax-related scams may involve a phone call, email, or text message from someone impersonating the IRS.
Remember that the IRS will never request sensitive information, like your bank account number or SSN, through text messages or emails. IRS communication will typically go through regular mail. If someone contacts you pretending to be an IRS representative, report them. You can also create a secure IP PIN, a six-digit number only the IRS and you know. An IP PIN can keep scammers from using your SSN to file a tax return.
Levy & Associates, Inc. – Over 20 Years of Reliable and Efficient Tax Resolution Services
Do you dread the 2023 federal tax season? Did you encounter tax problems like liens, penalties, or a tax audit? Our experienced tax professionals at Levy & Associates can help you resolve any tax issue with top efficiency and minimum hassle. Call 800.TAX.LEVY or contact us online to learn more about our tax services.