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

2024 Crypto Tax

Posted by admin on April 4, 2024

Last modified: April 4, 2024

The specific 2024 crypto tax rate you pay on cryptocurrency transactions is influenced by how long you hold the asset and your total income. Suppose you are a taxpayer in the United States. In that case, short-term capital gains arising from cryptocurrency held for less than a year are taxed at regular income tax rates varying from 10% to 37%, depending on the total income level you’ve earned and tax bracket you are subject to. Conversely, long-term capital gains from cryptocurrency profits held for over a year are taxed at rates between 0 and 20%.

When engaging in mining, staking, lending, or making payments for goods and services in the crypto world, these activities are categorized as regular income. They are subject to taxation based on your crypto tax bracket. The crypto tax rate you are liable for will be determined by your total income, falling within 10-37% range.

Regarding cryptocurrencies, the IRS categorizes them as property and enforces corresponding tax regulations. US taxpayers are subject to a crypto tax rate aligned with either short- or long-term capital gains, similar to stocks, or standard income tax rates based on the method of acquisition of the cryptocurrency.

How Does US Taxes on Crypto Assets?

How does crypto gets taxed in the US? Understanding the tax implications of cryptocurrency is essential for users to effectively navigate the complexities of their financial strategies. In the United States, the IRS categorizes crypto earnings as either income or capital gains, depending on the specific taxable event involved in generating the profits.

No matter the particular cryptocurrency involved—Bitcoin, Ethereum, or alternative coins—the IRS enforces equivalent tax regulations on all cryptocurrency transactions.

Tax Form 8300 for Crypto Transactions more than $10,000 for 2024 Crypto Tax

Commencing on January 16, 2024, the IRS has offered clear guidance by indicating that enterprises involved in particular online transactions only need to utilize Tax Form 8300 once additional regulations are released.

In response to an upcoming tax reporting law that took effect on January 1, 2024, there were growing apprehensions within the industry. The new legislation required individuals engaged in a trade or business to report transactions exceeding $10,000 using Form 8300.

In a recent development, the Infrastructure Investment and Jobs Act has introduced a requirement for individuals who receive $10,000 or more in cryptocurrency during their business activities to report such transactions to the IRS, despite the familiar nature of the reporting form.

When it comes to crypto transactions, applying this general guideline can be difficult because of the challenges associated with collecting essential information, predominantly caused by the pseudonymous characteristics of cryptocurrency transactions.

In light of unclear guidance from the IRS concerning the legislation, businesses dealing with crypto transactions over $10,000 are temporarily exempt from filing Form 8300 until the uncertainties are addressed. As soon as the IRS releases more information, this guide will be revised promptly to reflect the updated guidelines.

How to File my 2024 Crypto Tax

In accordance with IRS regulations, individuals are obligated to declare their cryptocurrency activities. This includes any buying, selling, exchanging, or discarding of digital assets, all of which are considered taxable capital gains or losses. Additionally, earnings from crypto mining, staking, and yield farming are subject to income tax.

First, Track your profits and losses

In the initial phase, it is essential to assess gains and losses when engaging in cryptocurrency transactions such as selling or trading. Each of these actions initiates taxable events. The first step is to determine the disparity between the asset value at the time of disposal and its cost basis in order to calculate the gains or losses incurred.

Second, Work Through the Tax Form 8949

In the second phase, it is necessary to fill out Form 8949 from the Internal Revenue Service. Form 8949 should be utilized for reporting any profits or losses from cryptocurrency transactions. This particular form is intended for documenting all crypto exchanges made throughout the year.

Third, Prepare Your Schedule D

Next, you will need to connect Form 8949 with Schedule D. Form 8949 should be attached to your Form 1040 Schedule D, where you will consolidate information on capital gains and losses. Make sure to categorize your short-term and long-term gains and losses separately.

Finally, Gather Income and Earnings from Crypto

Upon reaching final step, it’s crucial to account for earnings from cryptocurrency activities such as mining and staking. This crypto income should be classified as ordinary income and reported on Form 1040 Schedule 1 under the section “Additional Income and Adjustments to Income”.

How Does the IRS Audits My 2024 Crypto Tax

The IRS monitors cryptocurrency transactions through exchanges, third-party reports, and blockchain analysis. Let’s take a closer look at the methods employed by the IRS to monitor crypto transactions and ensure regulatory compliance.

When it comes to reporting transactions to the IRS, third-party platforms and exchanges play a crucial role by providing users with transaction data. In addition, the IRS employs blockchain analysis to track public cryptocurrency transactions through the expertise of blockchain specialists.

When it comes to investigating cryptocurrency platforms, the IRS has a tool known as John Doe Summons. This legal mechanism enables the IRS to request information from platforms regarding users who meet certain criteria, such as engaging in a particular volume or value of transactions.

In the pursuit of uncovering tax evasion in crypto transactions, the IRS utilizes subpoenas to obtain user data from various platforms. These legal tools are essential for the IRS to collect relevant information and identify individuals involved in dubious financial activities. Notable exchanges such as Coinbase, Circle, Kraken, and Bitstamp have been recipients of these crucial subpoenas that aid IRS investigations.

Ensuring full compliance with tax regulations entails operating under the assumption that the IRS closely monitors all your cryptocurrency transactions. It is crucial to strategize and prepare for this level of oversight.

Tags: 2024 crypto tax, crypto tax, crypto tax in 2024
Category: Tax Deductions and Credits, Tax News, Tax Tips and Tricks
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Types of Crypto Taxes in 2024

Posted by admin on March 21, 2024

Last modified: March 22, 2024

Taxable Crypto Transactions

Exploring the various crypto transactions and crypto taxes consequences is essential for individuals navigating the world of cryptocurrency. This analysis centers on the tax implications of crypto activities in the United States as outlined by the IRS. Our comprehensive resources on international crypto taxes offer valuable insights to global taxpayers in this evolving landscape of digital assets.

Find your PriorTax dedicated Tax Professional to walk you through your crypto tax filing from start to finish to file your taxes and maximize your tax refund accurately.

Crypto Tax From Crypto Losses

In taxation, it is important to recognize that losses incurred in cryptocurrency investments can serve as a valuable means to counterbalance the taxes applied to profits derived from the sale of various capital assets. For individuals with a tax filing status of single or married filing jointly, the losses can be used to offset up to $3,000 of income.

Individuals have the opportunity to lower their tax burden by accounting for cryptocurrency losses on their tax returns. This strategy allows them to lessen their overall tax liability by decreasing their taxable income through the inclusion of losses from crypto investments.

Crypto Taxes on Lost or Stolen Crypto

Unfortunately, when you find yourself without lost or stolen cryptocurrency, there is no specific process for claiming losses related to theft. The IRS clarified 2018 that deductions for losses are only permitted in cases of federally declared disasters, using Form 4684 (Casualties and Thefts).

Crypto Taxes on your income

US taxpayers must adhere to tax regulations when it comes to dealing with cryptocurrencies. Income generated from certain crypto-related activities is subject to taxation at the prevailing rates of 10-37%.

Cryptocurrency mining
The sum from Crypto Staking
Receiving Cryptocurrency from selling goods and/or services
Crypto taxes from selling crypto and trading crypto

The IRS considers the following crypto transaction as taxable events:

Trading one crypto for another crypto (e.g., BTC for ETH)
Using crypto for buying goods or services (e.g., BTC for a Tesla)
Exchanging crypto for fiat currency (e.g., BTC for USD)
Other form of selling or disposal of crypto

In the eyes of the Internal Revenue Service (IRS), cryptocurrency is categorized as property and is subject to taxation based on this classification. US taxpayers are required to pay taxes on their cryptocurrency holdings at rates equivalent to those applied to short- or long-term capital gains from stock investments or standard income tax rates, depending on the method through which the cryptocurrency was obtained.

When it comes to cryptocurrency investments in the United States, the tax implications differ based on the duration of asset holding. Short-term capital gains on crypto assets held for under a year are taxed at variable rates from 10% to 37%, depending on the individual’s income and tax bracket. Long-term capital gains held more than a year on profits from crypto have a 0-20% rate.

Crypto Taxes for Moving Crypto Between Digital Wallets

When transferring cryptocurrency from one wallet to another, there is no tax implication as long as the transfer involves only moving the tokens without engaging in trades with other cryptocurrencies or converting them into regular fiat currencies at the time of transfer.

Crypto Taxes When Buying Cryptocurrency with Stablecoins

In the realm of stablecoin fluctuations, the slight changes in value typically do not significantly affect the overall tax responsibility. However, it remains crucial to include details of stablecoin activities in your tax filings. Similar to trading fiat currency, engaging in transactions involving stablecoins within the cryptocurrency realm carries comparable tax considerations.

Crypto Tax from Crypto Staking

When it comes to crypto staking taxes, it is important to consider both income and capital gains. The proper procedure includes declaring the staking rewards’ fair market value at the time of receipt and calculating capital gains or losses when the staked assets are eventually disposed of.

Crypto Taxes for Adding/Removing Liquidity from DeFi Protocols

Engaging in a DeFi liquidity pool may have tax implications that should not be overlooked. Depending on the situation, exchanging your digital assets for a liquidity pool token, which symbolizes your ownership in the pool, could result in a taxable event subject to the usual capital gains regulations. Conversely, when you stake your tokens in the pool and then acquire rewards tokens, taxes are typically incurred when you collect those rewards.

Exiting a liquidity pool and assessing gains or losses presents an additional tax consideration. The absence of clear IRS directives regarding liquidity mining has generated ambiguity. Comparisons to the IRS’s treatment of airdrop and fork coin income have fueled speculation that similar categorization may be applied to liquidity mining rewards, potentially classifying them as income instead of capital gains.

Crypto Tax on Airdrops and Hard Forks

According to official IRS guidelines, airdrops and hard forks are subject to taxation. The taxable income should be based on the digital currency’s fair market value (FMV) when it is received. The timestamp on the transaction ledger or blockchain determines the date of receipt.

Crypto Taxes on Bankruptcies

If you find yourself in possession of cryptocurrency that loses value due to another entity’s bankruptcy following the resolution of a cryptocurrency company’s insolvency proceedings, you may offset the loss incurred by using the initial purchase price of the cryptocurrency against any gains you have made.

Should you experience an excess loss, you can deduct it from your usual income sources, like salaries, up to $3,000 for single filers or those married filing jointly ($1,500 for married filing separately). Any leftover loss beyond this threshold can be rolled over to the next tax year for application.

Crypto Taxes on Crypto Gifts and Crypto Donations

In the case of receiving cryptocurrency as a gift, the aspect of gifting taxes is not triggered at the onset. Tax implications arise when the cryptocurrency is sold, leading to potential capital gains or losses for the recipient. If the digital assets are sold at a profit, the recipient’s cost basis aligns with that of the donor. Conversely, suppose the cryptocurrency is sold at a loss. In that case, the recipient’s basis is determined by taking the lower value between the donor’s basis and the fair market value at the time of receipt.

There are no tax implications to consider when presenting cryptocurrency as a gift. However, receivers need to be aware of the donor’s original asset value. If you choose to contribute cryptocurrency to a charitable organization recognized under section 501(c)(3), you can claim a tax-free deduction.

Crypto tax from Crypto Mining

The taxation rules surrounding crypto mining vary depending on the geographical region. In the United States, individuals engaged in crypto mining can anticipate taxes on their mining rewards as income and on the capital gains generated from the sale of mined coins. There are differences in how taxes are imposed on hobbyist miners compared to professional miners running mining operations as a business. Professional miners may be eligible for certain tax deductions based on business activities.

Crypto Taxes on DeFi

When engaging in DeFi crypto staking, the returns generated may be liable for taxation under either capital gains or income, depending on how they are received. These returns can come in the form of additional tokens or an appreciation in the value of the tokens already held. Some DeFi platforms offer interest or incentives by depositing extra coins directly into the lender’s wallet.

Crypto Tax on DAOs

In instances where a US taxpayer receives cryptocurrency from a decentralized autonomous organization (DAO) in exchange for goods or services, it is obligatory to disclose this as income. Any gains made from selling these assets later on are liable to be taxed as capital gains. Moreover, if the distributions include governance tokens or non-fungible tokens (NFTs), they are also considered taxable income. Profits derived from vending these allocated assets are similarly subject to capital gains taxation.

Crypto Taxes on NFTs

When it comes to selling NFTs, it’s important to note that taxes are inevitable for US taxpayers, and there is no way to sidestep them legally. The IRS classifies NFTs as property, and depending on the nature of the NFT, it may fall under the category of collectibles, which could mean facing higher tax rates.

In line with the different categories, proceeds, and deficits arising from the sale of NFTs are required to be disclosed on tax documents, with tax rates contingent upon how long the NFT was held and the individual’s total income. The IRS announced a novel strategy for taxing NFTs as collectibles in March 2023, resulting in specific NFT profits being subject to a flat 28% tax rate, diverging from the usual capital gains rates.

Tags: crypto tax, crypto tax 2024, crypto tax calculator, crypto taxes
Category: Tax and Life Changes, Tax Deductions and Credits, Tax Tips and Tricks
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Clean Vehicle EV Tax Credit for 2023 Tax Return

Posted by admin on March 7, 2024

Last modified: March 8, 2024

Start saving money on gas today with the Clean Vehicle Credit offered through the Inflation Reduction Act. This EV tax credit provides a dollar-for-dollar reduction of the taxes you owe, giving you the opportunity to save up to $7,500 as tax credit when buying a new electric vehicle or up to the lesser of $4,000 or 30% of the purchase price for a used electric vehicle.

Exploring eco-friendly transportation goes beyond mere savings; it signifies a commitment to cleaner journeys and a step forward towards a more sustainable driving experience. To assess your eligibility for this credit, we have compiled essential information such as its definition, functioning, and existing criteria.

What is the Clean Vehicle EV Tax Credit?

The Electric Vehicle EV Tax Credit, designed to reduce taxes for individuals buying electric vehicles, initially provided up to $7,500 for new EV purchases as outlined in Section 30D of the Internal Revenue Code. With the passing of the Inflation Reduction Act in 2022, significant modifications were made to the regulations governing electric vehicles bought between 2023 and 2032, establishing the new Clean Vehicle Credit program.

In accordance with the Inflation Reduction Act, similar to past regulations, individuals who acquire a brand-new plug-in electric vehicle or a fuel cell car starting from 2023 can potentially be eligible for a tax credit aimed at promoting clean transportation, which could amount to a maximum of $7,500. Noteworthy changes include the introduction of income thresholds, manufacturer sales price conditions, and final assembly prerequisites, which needed to be included in earlier guidelines.

Commencing from the upcoming year of 2023, there is an opportunity to avail of an EV tax credit when acquiring a second hand electric vehicle. This credit is calculated as less than $4,000 or 30% of the vehicle’s purchase price. Additionally, specific criteria such as income, manufacturer sales price, and final assembly apply to used electric vehicles.

Is There a Difference Between State Electric Benefits and Federal EV Tax Credits?

Indeed, the Federal EV Tax Credit, overseen by the IRS, serves as a pivotal component in diminishing the expenses for taxpayers investing in electric vehicles. Enacted through the Inflation Reduction Act, this credit is designed to alleviate your tax burden by decreasing the amount owed in taxes.

It is important to note that in addition to the widely recognized federal tax credit for electric vehicles, there are also state-specific incentives available for buyers. One such example is the Clean Vehicle Rebate Project (CVRP) in California, which offers rebates to encourage the purchase of electric vehicles.

You will receive state rebates by mail when you buy an electric vehicle and fulfill certain state-specific criteria. These rebates are separate from any tax returns you may file.

How Does the Clean Vehicle EV Tax Credit Operate?

The Inflation Reduction Act of 2022 marked a notable change in approach, particularly regarding vehicle acquisition, from 2023 to 2032. As stipulated by the IRS, individuals and businesses alike can benefit from the federal EV tax credit.

Within the system are specific income limits that must be adhered to, ensuring that there is a structured approach rather than a chaotic free-for-all.

It is crucial to emphasize that this credit cannot be refunded, thus preventing individuals from receiving more money than their tax liabilities. Nonetheless, it does provide the benefit of a one-to-one reduction in tax obligations.

EV eligible for the Clean Vehicle Tax Credit?

Are you curious about whether your car is eligible for the EV tax credit? Determining eligibility is a challenging process, but fear not – let’s dive into the details for you.

Meeting certain criteria is necessary for a vehicle to qualify for the EV tax credit, including having a battery capacity of seven kilowatt-hours or more and satisfying specific mineral and battery component standards, among other considerations.

Criteria for qualification will now vary based on your financial standing, the retail price set by the manufacturer, and the location of the electric vehicle’s final assembly within the United States. Additionally, eligibility encompasses pre-owned electric vehicles, enabling you to receive credit for them as well.

Getting the Clean Vehicle EV Tax Credit in 2024?

Taking advantage of the federal EV tax credit is essential to maximizing the benefits available to you. Many people tend to miss out on potential tax credits, making claiming them an important step in optimizing your benefits. Ensure you are well-prepared when filing your taxes by having all the necessary information and forms ready. This includes specifics regarding your vehicle’s battery capacity, weight, where it was finally assembled, and the VIN.

Make sure to have those details handy when you decide to apply for the credit and submit Form 8936, the Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles), along with your tax return.

Rest assured that you won’t need to stress about determining which forms to submit for the Clean Vehicle Tax Credit. The tax professional, a dedicated team member at PriorTax will guide you through a series of straightforward questions regarding your EV acquisition. By cross-referencing your income details from documents such as W-2s and 1099s, they will accurately calculate the electric vehicle credit applicable to you.

Explore the option of seeking guidance at PriorTax while having your tax return examined by a PriorTax Tax Professional before submission. Alternatively, entrust your taxes to a PriorTax dedicated tax professional for seamless preparation. A fresh addition this season allows for face-to-face consultations with a nearby professional for efficient tax filing.

Tags: Clean Vehicle EV Tax Credit, Clean Vehicle Tax Credit, ev tax credit
Category: Tax Deductions and Credits, Tax Tips and Tricks, Taxes for Prior Years
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Standard Deduction for 2023 Tax Year

Posted by admin on March 7, 2024

Last modified: March 8, 2024

Individuals filing their tax returns in 2024 can benefit from a standard tax deduction in fiscal year 2023. Single tax filers are entitled to a standard tax deduction of $13,850, while joint filers can claim $27,700. Heads of household have a standard tax deduction of $20,800 available to them. 2023 Tax Filers who are 65 or older may have a higher standard deduction amount.

When considering ways to reduce your taxable income, the IRS provides two primary options: claiming the standard deduction or itemizing your deductions. Many individuals choose the standard deduction for its simplicity, even though itemizing could be more beneficial depending on individual circumstances.

Let’s begin by exploring the concept of the standard deduction, including who it benefits most and the specific standard deduction figures for the tax years 2023 and 2024. Additionally, we’ll delve into the extra standard deduction figures available for individuals aged 65 and above, along with guidance on computing it for dependents.

What is the Standard Deduction?

When it comes to tax deductions, the standard deduction is a fixed amount recognized by the IRS. This deduction is subtracted from your adjusted gross income to reduce your taxable income. Your tax filing status typically determines the level of standard deduction you qualify for.

Among specific individuals, including those who have visual impairments or have reached the age of 65, there is typically a provision for an increased standard deduction, often referred to as an extra standard deduction. Conversely, those who are eligible to be claimed as dependents may receive a reduced standard deduction.

In the realm of tax deductions, the standard deduction is a common benefit accessible to many taxpayers, even in the absence of other qualifying deductions or credits. While the IRS typically allows individuals to claim this deduction without much scrutiny, specific scenarios might render some taxpayers ineligible for this tax benefit.

Consider this scenario: When married couples file their 2023 tax return jointly and have an adjusted gross income (AGI) of $125,000, they qualify for a standard deduction of $27,700. This deduction effectively lowers their taxable income to $97,300 ($125,000 – $27,700).

How the Standard Deduction Works for 2023 Tax Return

When it comes to filing your taxes, you have the choice between claiming the standard tax deduction or itemizing your tax deductions for 2023. Opting for the standard deduction allows you to deduct a set amount without needing to provide evidence to the IRS. On the other hand, itemized deductions provide an alternative method for lowering your taxable income.

Individual expenses permitted by the IRS, known as itemized deductions, serve as a means to reduce your taxable income. Some examples of these expenses are property taxes, specific unreimbursed medical expenses, and business mileage.

Opting for the standard deduction prevents you from claiming deductions on home mortgage interest or accessing specific tax benefits. However, if you choose to itemize your deductions, it is essential to retain all relevant tax deduction documents in case the IRS audits you.

Standard Deduction 2023

In the tax world, the 2023 standard deduction holds different values for various filing statuses. For single tax filers and married individuals filing separately, the deduction stands at $13,850, while it increases to $27,700 for those filing jointly. Heads of household are eligible for a standard deduction of $20,800.

Tax Filing Status 2023 Standard Deduction

Single $13,850.
Married, filing separately $13,850.
Married, filing jointly; qualified widow/er $27,700.
Head of household $20,800.

Additional standard tax deduction who is 65 of age or older

Individuals aged 65 and above, as well as those classified as blind according to IRS criteria, are eligible for an extra standard deduction that can be applied on top of their current standard deduction allowance.

The amount of additional tax deduction you qualify for is determined by your filing status and the specific criteria that apply to your situation.

2023 Standard Tax Deduction for Dependents

When submitting your tax return and being claimed as a dependent by another individual, the standard deduction you’re eligible for is based on your earned income. In the upcoming tax year of 2023, the options available to you are a fixed $1,250 or the total of your earned income plus $400. It’s important to keep in mind that if you choose the latter option, the sum cannot surpass the standard deduction allotted for your specific tax filing status.

Tags: Standard Deduction 2023, Standard Deduction for 2023
Category: Tax Deductions and Credits, Tax for Business, Taxes for Prior Years
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Itemized vs. Standard Tax Deduction calculator

Posted by admin on February 29, 2024

Last modified: March 4, 2024

Explore our tool that contrasts the Standard Tax Deduction and Itemized Tax Deductions. In just a short amount of time, you can grasp the differences between these tax deduction types and receive an estimated calculation of your tax deductions by providing key information.

Should you be wondering about whether to opt for the standard or itemized tax deduction, this tool can guide you and even suggest strategic end-of-year tax strategies to boost your itemized tax deductions. Feel free to reach out to our dedicated Tax Professional for a personalized assessment of how you can maximize your tax refund.

Pros and Cons of Choosing Itemized Tax Deductions?

Exploring tax deductions on your tax return has the potential to make a significant impact on individuals by lowering their tax liability. However, grasping the concept of itemized tax deductions is essential to determine if you qualify for the standard deduction or itemized tax deductions. It’s crucial to accurately discern which tax deduction method is most beneficial for you.

Consider this scenario: with minimal itemized deductions such as personal property taxes on your vehicle and without significant expenses like home mortgage interest, it becomes evident that opting for the standard deduction is the probable choice.

Pros of Choosing the Itemized Tax Deduction

Choosing to itemize tax deductions rather than opting for the standard tax deduction can prove advantageous from a tax perspective. By itemizing, you have the opportunity to include detailed expenses such as mortgage interest, medical bills, or substantial charitable contributions, among others. This approach has the potential to lower your taxable income even more if your itemized expenses exceed the standard deduction for the applicable tax year.

Additionally, should you find yourself nearing the standard tax deduction threshold, you have the opportunity to enhance your tax deductions by ensuring you collect receipts for extra itemized deductions that could potentially push you beyond the standard deduction limit.

Explore the benefits of leveraging our advanced tax deduction calculator to gain clarity on the potential tax deductions tailored to your specific situation. This tool empowers you to make an informed decision on whether the standard tax deduction suffices or if itemizing your tax deductions would be more advantageous for you.

By utilizing the calculator before the year-end, you can strategically plan out tax-saving maneuvers to maximize your itemized tax deductions before the year concludes.

Cons of Choosing the Itemized Tax Deduction

In terms of potential downsides, there are no significant issues to be concerned with. Individuals who opt for itemized tax deductions simply need to ensure they have all the necessary paperwork ready come tax season to avoid any oversights. For example, those who own a home should have their Form 1098 detailing mortgage interest payments, records of property tax payments, documentation of state income or sales taxes paid, as well as receipts for any charitable contributions made.

Rest assured that you don’t need to stress about understanding the nuances of itemized tax deductions. PriorTax is designed to guide you through the process by asking straightforward questions about your tax deductions, regardless of your knowledge of their classification. For further clarity on which expenses qualify as itemized tax deductions, utilize our standard versus itemized tax deduction calculator to gain insight.

You may need to collect additional paperwork when it comes to itemizing. Some may be attracted to a more straightforward method involving standard tax deductions. However, if your itemized tax deductions exceed the standard amount, putting in a bit more effort to gather the necessary documents can lead to cost savings. Utilize our comprehensive tax document checklist to streamline the process of compiling your documents for itemizing tax deductions.

What are the Pros and Cons of Taking the Standard Tax Deduction?

Pros of Choosing the Standard Tax Deduction

In considering your tax planning, it’s crucial to grasp the impact of each tax deduction on your overall tax picture. Many individuals choose the standard tax deduction when filing their taxes for several reasons.

To begin with, the efficiency of the process is notable. Furthermore, the annual adjustment of the standard tax deduction results from inflation and the decisions made by Congress. This adjustment helps lower taxpayers’ taxable income.

Different filing statuses, such as single, married, filing tax jointly, or head of household, determine the standard deduction amount, which is increased for individuals aged 65 or older and those who are visually impaired.

Please be aware that if married couples decide to file separately, they won’t be able to claim the standard deduction if one spouse chooses to itemized deductions. It is necessary for both spouses to agree on either itemizing tax deductions or taking the standard tax deduction.

Cons in Choosing the Standard Deduction

Opting for the standard tax deduction simply for convenience might lead to overlooking opportunities to deduct expenses and potentially lower taxable income. The decision between standard and itemized tax deductions ultimately comes down to crunching the numbers.

When faced with the decision between standard and itemized tax deductions, it ultimately comes down to the numbers at hand. Opt for itemized deductions if they exceed the standard tax deduction amount, and choose the standard deduction if it provides greater benefits. In cases where your standard deduction aligns closely with your itemized deductions, ensure to review and consider any additional itemized deductions that could potentially tip the scale in favor of itemizing.

Rest assured that deciphering between standard and itemized tax deductions is not a concern you need to dwell on. Rest easy knowing that PriorTax can maximize your tax benefits, regardless of your financial decisions made the previous year. Whether you prefer to handle your taxes independently or seek the expertise of a PriorTax Tax Professional, rest assured that we are committed to securing every dollar you are entitled to and aiming for your most substantial tax refund possible.

Tags: itemized deduction, Itemized Tax Deduction, standard deduction, standard tax deduction
Category: Tax and Life Changes, Tax Deadlines, Tax Deductions and Credits, Tax for Business, Tax Tips and Tricks, Taxes for Prior Years
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Standard vs Itemized Tax Deduction

Posted by admin on February 29, 2024

Last modified: March 4, 2024

If you have ever carefully listed out your itemized tax deductions before, especially if you own a home, consider a different approach now. With the updated standard tax deduction amount for your specific filing status, you might find it more advantageous to take the standard deduction instead of itemizing your tax deductions.

The latest data from the IRS reveals that approximately 90% of individuals filing taxes are now opting for the standard deduction, a shift largely attributed to changes implemented through the Tax Reform legislation in 2017. If you find yourself uncertain about the most advantageous choice for this tax year, consider utilizing our convenient tax deduction calculator or reaching out to our specialized tax experts for personalized guidance throughout the entire process.

In just a short amount of time, grasp the modifications in the standard deduction and itemized deductions, and receive an approximate calculation of your deductions depending on the information provided. Additionally, this tool advises you on whether to opt for standard or itemized deductions and offers suggestions on year-end tax strategies to enhance your itemized deductions.

In general, when your standard deduction outweighs your itemized deductions, opting for the standard deduction is usually the more advantageous choice.

Should I take the standard vs. itemized tax deduction

Contemplating whether to opt for the standard deduction or dive into the itemized deduction realm? The decision of which one will yield a greater tax benefit for you is contingent upon your specific situation. Let’s delve into different scenarios where either the standard or itemized deduction would be most advantageous.

When you should take the standard deduction

Understanding the complexities of tax preparation may appear overwhelming at first, yet rest assured, assistance is within reach. The choice between opting for the standard deduction or itemizing largely hinges on your eligibility for various deductions. The standard deduction represents a fixed sum determined by your tax filing status, offering supplementary advantages for individuals aged 65 and above or with visual impairments.

The current standard tax deduction is:

$13,850 for single filers
$13,850 for married, filing separately
$20,800 for heads of households
$27,700 for married, filing jointly

Each year, the IRS updates the standard deduction figures to account for inflation. As a result, it is important for you to review your expenditures annually in order to determine the best strategy for your situation if you have itemized deductions such as mortgage interest and property taxes.

In the upcoming tax year of 2023, significant inflation adjustments have been implemented, marking one of the largest increases in decades at 7.1%. This adjustment may lead to the standard deduction surpassing your itemized deductions for the year, making it more advantageous to opt for the standard deduction.

In plain terms, choosing the standard deduction is the best decision when the total of eligible itemized expenses falls short of the standard deduction threshold. When contemplating whether to go with the standard deduction, it is crucial to evaluate itemized deductions like mortgage interest, medical costs, and charitable contributions to inform your tax-filing decision-making process.

When you should take the itemized deduction

Wondering about the right time to consider itemizing deductions? It becomes beneficial when your qualifying expenditures, such as medical expenses, mortgage interest, or donations to charity, exceed the standard deduction threshold. By itemizing deductions, you could potentially reduce your tax liability if these eligible expenses surpass the standard deduction amount.

In certain scenarios, it is possible for taxpayers to find themselves in a situation where their itemized deductions match the standard deduction amounts set at $13,850 for single filers and $27,700 for married couples filing jointly. To overcome this, individuals could consider strategies such as increasing their charitable donations towards the end of the tax year or ensuring they include all eligible charitable contributions when filing their taxes, thereby elevating their total itemized deductions above the standard deduction threshold.

Exploring potential qualifying expenses can be made easier by consulting our article on often-overlooked deductions. Utilize our calculator that compares standard and itemized deductions for a clearer picture. Additionally, our team of dedicated tax professionals at PriorTax will tailor their guidance to your specific circumstances without requiring you to distinguish between standard and itemized deductions.

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

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.

Tags: accurate tax, accurate tax filing, tax amendment
Category: Tax Deductions and Credits, Tax Tips and Tricks, Taxes for Prior Years
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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.

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.

Tags: back tax, back taxes, past tax, past taxes
Category: Tax Deadlines, Tax Deductions and Credits, Tax Tips and Tricks, Taxes for Prior Years
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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.

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.

Tags: 2024 Business Tax Filing, business tax, business tax filing
Category: Tax Deadlines, Tax Deductions and Credits, Tax for Business, Tax News, Tax Year 2023
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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.

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.

Tags: 2024 E-file, 2024 Efile, 2024 Tax Efile
Category: Tax Deductions and Credits, Tax News, Tax Year 2023
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