Your favorite uncle, Sam — also known as the Internal Revenue Service (IRS) — has instituted changes for the 2023 tax year. Like it does every year. These are the taxes you’ll file in 2024.
We’re happy to report there’s a silver lining to the inflation we all experienced in 2023. It prompted tax-related changes that will benefit some taxpayers. On the other hand, if you had a side hustle in 2023, the IRS will finally enforce new requirements for reporting that income.
Our guide details these changes and other key things to remember as you determine how to do taxes effectively and efficiently for the 2023 tax year.
Understanding tax filing requirements
The IRS made more than 60 inflation-related adjustments for the 2023 tax year. Here are two that will impact virtually all people who file taxes in 2024.
Increased income tax brackets
When you prepare your taxes, you choose a filing status. The two most common are single and married filing jointly. In less common cases, you might select married filing separately or head of household.
Your tax rate is the percentage of your income you pay in taxes. The IRS uses tax brackets to determine your tax rate. While the IRS did not adjust tax rates between 2022 and 2023, it increased tax brackets by 7% across the board to account for inflation. To help illustrate what this means, we’ll compare a new tax bracket from 2023 (see the chart below) to the corresponding one from 2022.
Here are the 2023 tax rate brackets for single and married filing jointly taxpayers:
For the 2023 tax year, single filers earning between $44,726 and $95,375 are taxed at a 22% rate. In 2022, the tax bracket that corresponded with the 22% tax rate was $41,776 to $89,075.
Run the math and you’ll see a 7% change on the low and high end of this range between 2022 and 2023. The IRS made this change to every tax bracket for the 2023 tax year.
This might help some taxpayers whose income did not increase by more than 7% between 2022 and 2023 by decreasing the tax rate on at least some of their income.
Just because you fall into a particular tax bracket doesn’t mean you pay the corresponding tax rate on all of your taxable income. For example, a married filing jointly couple with $89,450 in 2023 combined income pays 10% on the first $22,000 and 12% on the remaining $67,450.
In 2022, roughly $5,900 of this couple’s income would have been taxed at 22% when the tax bracket at that rate was $83,551 to $178,150. This hypothetical couple should — all else being equal — pay less income tax in 2023 thanks to the changes.
The standard deduction goes up again
The standard deduction is a dollar amount the IRS sets that reduces your taxable income.
Good news — as it does most years, the standard deduction is going up again in 2023:
- For single taxpayers, it is $13,850, up $900 from 2022.
- For married filing jointly taxpayers, it is $27,700, up $1,800 from 2022.
While the standard deduction makes filing your taxes easier, some taxpayers benefit by itemizing their deductions, particularly if the total of their itemized deductions is greater than their standard deduction. According to the IRS, taxpayers with unreimbursed medical expenses, charitable contributions and other qualifying expenses might benefit by itemizing. In rare cases, the IRS requires taxpayers to itemize.
Some people may not have to file taxes for the 2023 tax year. The law doesn’t require you to file a tax return if you make less than a certain amount of money, which varies based on age and filing status. The IRS offers a tool to help determine your options. Even if you don’t have to file, you might want to anyway. If you paid some income tax, you might get it all back. Also, you could qualify for credits, often meant to assist low-income households (for example, the earned income tax credit), that can generate a refund.
How to collect and organize necessary documents
It’s like getting all your ingredients ready before preparing a meal, though not as much fun. To do things quickly and the right way, have the following information ready before you do your taxes:
- Your and, if applicable, your spouse’s and any dependent’s Social Security numbers
- 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 you 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 you can deduct them
- Mortgage and property tax statements
- Charitable contributions
- Unreimbursed medical expenses
- Education expenses
A big change for how to do taxes in 2023 and beyond — the dreaded 1099-K form. The IRS now requires third-party payment networks, such as Venmo and PayPal, to report to the agency — and copy you — with a 1099-K if you earned more than $600 in gross payments. This doesn’t count money family and friends Venmoed you for lunch or birthday gifts.
How to choose the right tax filing method
You might be thinking — this is a lot. And it can be. However, in our day and age of do-it-yourself everything, it has become increasingly easier to do your taxes yourself.
You can prepare and file your taxes online using software from companies such as TurboTax and H&R Block. If you have a simple return — with no forms or schedules to file other than IRS form 1040 — you might even be able to file for free.
These programs help you file taxes step-by-step. They ask questions to determine filing status. They also ask about your work, income and investments to help maximize deductions and credits and catch errors before submitting your return.
You can also find free third-party online tax software via the IRS. However, you must meet eligibility criteria, including adjusted gross income of $73,000 or less. If your income comes in above that threshold, you might opt for Uncle Sam’s Free Fillable Forms option. However, this is pure DIY, given that it does not provide guided instructions. The IRS plans to pilot a program in 2024 that will allow taxpayers to file directly with the agency for free — regardless of income.
How to file and submit your tax return
For those who expect a refund, in nearly all cases you should file electronically as the IRS says this is the easiest and quickest way to file your taxes — typically less than three weeks. If you choose to file by mail, the IRS warns it could take six months or more to process your return.
With most third-party software programs, the filing and submission stage is pain-free. The IRS will ask you to create a PIN to facilitate your electronic signature and help prevent fraud. You can track the progress of your return via email, through the preparation software or the IRS website.
Common tax filing mistakes to avoid
Attention to detail can help you avoid the most common — and basic — mistakes the IRS says people make, such as:
- Not waiting to receive all of your tax forms, such as W2s and 1099s, before filing
- Getting Social Security numbers wrong
- Not spelling names the way they’re spelled on Social Security cards
- Choosing the wrong filing status
- Bad math
- Inaccurate bank account numbers
Avoid these oversights to limit processing delays and, worse, receive an unexpected IRS notice weeks, months or even years after filing.
How to deal with tax refunds or balances owed
If you’re getting a refund — choose direct deposit, type your bank account and routing numbers accurately and file electronically. The IRS can process tax refunds in three weeks or fewer with direct deposit.
If you owe money, the IRS gives you several payment options. You can use your bank account, credit or debit card, digital wallet, checks, money orders and, at the time of filing, electronic funds transfer. You can pay with cash at an IRS retail partner or IRS service center.
If you don’t have the money to pay the IRS right away, you can request a payment plan. The IRS offers short-term payment plans, which last 180 days or fewer, and long-term, installment agreements. You might incur a setup fee and penalties and interest that accrue as you pay off your debt.
Seeking professional help for tax filing
If you have a super complicated return or you’re just not comfortable with the intricacies of how to file taxes, you can hire a pro like a certified public accountant (CPA), enrolled agent or registered tax preparer.
The pro will likely send you a list of documents to provide that they’ll need to file. You can send or drop off your information, and the professional does the rest. They’ll prepare and file your return, set up your refund or help you make payment arrangements and, of course, maximize your deductions and credits while helping to ensure you have everything in order. If you only have a few questions, a tax accountant, preparer or even lawyer can answer them, but, most likely, for a fee.
Ultimately, the taxpayer (that’s you!) who signs the return is responsible for the accuracy of the information on the return, so be sure to answer your tax preparer or advisor’s questions to the best of your knowledge, double-checking any data that make you feel uncertain.
Finally, mark Monday, April 15, 2024, on your calendar. That’s Tax Day — the deadline the IRS sets to submit your 2023 return. You can file an extension, which buys you time to file your taxes, but if you owe taxes, they still need to be paid by Tax Day to avoid possible penalties and added interest.