Tips for 2023 tax season offered

With the start of tax season on Jan. 29, the Internal Revenue Service has begun accepting and processing 2023 tax year returns. The standard deduction, which is adjusted annually for inflation, increased for tax year 2023 and will also increase for tax year 2024.

Laura Hendrix, extension associate professor of personal finance and consumer economics for the University of Arkansas System Division of Agriculture, said a taxpayer may choose to take the standard deduction or to itemize their deductions.

“There are several factors that can influence a taxpayer’s choice, including changes to their tax situation, any changes to the standard deduction amount and recent tax law changes,” Hendrix said. “Generally, most taxpayers use the option that gives them the lowest overall tax, and most people take the standard deduction, which changes each year for inflation.”

Hendrix said deductions are subtracted from a taxpayer’s income to determine adjusted gross income, or AGI, which is the amount on which an individual pays taxes.

“The more deductions you have, the lower your AGI and the less you will pay in taxes,” Hendrix said. “Deductions can reduce the amount of a taxpayer’s income before they calculate the tax they owe.”

Itemized deductions that taxpayers may claim include state and local income or sales tax, real estate and personal property taxes, home mortgage interest, personal casualty and theft losses from a federally declared disaster, gifts to a qualified charity and unreimbursed medical and dental expenses that exceed 7.5 percent of AGI.

Hendrix said the amount of one’s standard deduction depends on a taxpayer’s filing status, age, whether they are blind and whether the taxpayer is claimed as a dependent by someone else.

“Generally, if a taxpayer’s itemized deductions are larger than their standard deduction, it makes sense for them to itemize,” she said. “Taxpayers who choose to itemize deductions should read the in

structions for Schedule A and complete Form 1040, Itemized Deductions.”

Standard deduction amounts for tax year 2023, filing in 2024:

∎ For married couples filing jointly: $27,000, up $1,800 from 2022;

∎ For single taxpayers and married individuals filing separately: $13,850, up $900 from 2022;

∎ For heads of households: $20,800, up $1,400 from 2022.

Standard deduction amounts for tax year 2024, filing in 2025:

∎ For married couples filing jointly: $29,200, up $1,500 from 2023;

∎ For single taxpayers and married individuals filing separately: $14,600, up $750 from 2023;

∎ For heads of households: $21,900, up $1,100 from 2023.

PREPARATION IS KEY

The IRS expects more than 128 million individual tax returns to be filed by the April 15, 2024, tax deadline. Hendrix said it’s important for individuals and families to keep organized records for tax filing.

“It’s like getting all your ingredients ready before preparing a meal, though not as fun,” Hendrix said.

To do things “quickly and the right way,” Hendrix said taxpayers should have the following information ready before sitting down to file:

∎ Social Security numbers for yourself, your spouse and any dependents;

∎ Last year’s tax returns — federal and state;

∎ All of your W-2 forms if you were paid as an employee;

∎ All of your 1099 forms if you were paid, for example, as an independent contractor;

∎ Forms received from bank and investment accounts detailing interest earned, capital gains and losses and retirement account contributions;

∎ If you run your own business, a list of business expenses to see if they are deductible;

∎ Mortgage and property tax statements; m Charitable contributions; m Unreimbursed medical expenses; m Education expenses; m Child or dependent care expenses; and

∎ Tax credits. Hendrix said the Earned Income Tax Credit is a refundable credit.

“If you have worked and earned income under $59,187 in 2023, you may qualify,” she said. “Even if you know you won’t owe any taxes, you should still file for EITC. The credit will be sent to you as a refund.”

Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC) are tax credits for filers with qualifying dependents. The Child Tax Credit is worth a maximum of $2,000 per qualifying child. Up to $1,600 is refundable as the Additional

Child Tax Credit. CTC is applied to the tax bill, and ACTC is refundable. Children must be under the age of 17 and must have lived with the taxpayer for more than half the year.

Child and Dependent Care Credit: Tax filers may claim between 20 and 35 percent of care expenses, up to $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals. Expenses paid for the care of a qualifying individual are eligible expenses if the primary reason for paying the expense is to assure the individual’s well-being and protection. The percentage claim allowed (20-35 percent) is based on income, with lower-income filers receiving a higher percentage allowed for the credit.

The IRS Tax Assistant at www.irs.gov/help/ita is an online tool and calculator that can help filers determine qualification and estimate amounts.

FILING RESOURCES

The IRS encourages taxpayers to file electronically with direct deposit, as this is the fastest and easiest way to receive a refund.

“Avoid advanced refund options offered by tax preparers that charge high fees,” Hendrix added.

IRS FREE FILE

If your income is $79,000 or less, you qualify for a free federal tax return. Access free online tax preparation and filing at an IRS partner site through IRS Free File.

If your income is more than $79,000, you can access fillable forms to prepare your own return without assistance.

Details: irs.gov/filing/ free-file-do-your-federaltaxes-for-free

MYFREETAXES

United Way provides MyFreeTaxes in partnership with the IRS’s Volunteer Income Tax Assistance (VITA) program to help filers prepare their tax returns on their own or have their return prepared for them for free. Consumers making less than $60,000 qualify for free tax prep.

Details: myfreetaxes.com

IN-PERSON TAX PREP

VITA and Tax Counseling for the Elderly (TCE) do free tax prep in person. For locations, visit treasury. gov/freetaxprepv or on the AARP Tax Aid at www.aarp. org/money/taxes/aarp_taxaide/locations.html

TAX FILING ASSISTANCE FOR MILITARY

MilTax e-filing software is free for service members, eligible family members and survivors.

Details: mil/financial-legal/taxes/miltax-military-tax-services/

For more information, visit IRS.gov. For extension resources on personal finance, visit uaex.uada.edu/ money. To learn about extension programs in Arkansas, contact a local Cooperative Extension Service agent or visit www.uaex.uada.edu.