Tax Filing Season: Time To Gear Up!
Even though you're working with a tax pro, there are things you can do in advance to help yourself.
The IRS’s Get Ready page on IRS.gov offers practical tips and resources to help you prepare. Below is a list of key updates and essential steps for you to consider to make tax filing easier.
Get Your PIN
Gather and Organize Documents
1099-K Reporting Changes
Standard Versus Itemized Deductions
Retirement Plan Contributions
Business Use of Home
Include Digital Assets
Refund Timing
Watch the Calendar
Get Your PIN
An IP PIN is a six-digit number that prevents someone else from filing a federal tax return using your Social Security number or Individual Taxpayer Identification Number. It’s a vital tool for ensuring the safety of taxpayers' personal and financial information.
The best way to sign up for an IP PIN is through the IRS Online Account. If an individual cannot create an Online Account, alternative methods, such as in-person authentication at a Taxpayer Assistance Center, are available. More information is available on how to sign up at IRS Online Account.
You can create or access an IRS Online Account at online account for individuals. With an IRS Online Account, you can:
View key details from their most recent tax return, such as adjusted gross income.
Get account transcripts to include wage and income records.
Sign tax forms like powers of attorney or tax information authorizations.
View and edit language preferences and alternative media.
Receive and view over 200 IRS electronic notices.
View, make, and cancel payments.
Set up or change payment plans and check their balance.
Gather and Organize Tax Documents
To make tax time easier, establish an adequate recordkeeping system, either electronic or paper, to organize all essential documents in one place. This includes year-end income forms, such as:
Forms W-2 from employers.
Forms 1099 from banks or other payers
Forms 1099-K from third-party payment networks.
Forms 1099-NEC for non-employee compensation
Forms 1099-MISC for miscellaneous income
Forms 1099-INT for interest income and records of all digital asset transactions.
1099-K Reporting Changes
Taxpayers who received over $5,000 in payments for goods and services through an online marketplace or payment app in 2024 should expect to receive a Form 1099-K in January 2025. A copy of this form will be sent to the IRS as well.
Although the IRS has said it is taking a phased-in approach to implementing the Form 1099-K reporting threshold, be advised that there have been no changes to the taxability of income. All income, including proceeds from part-time work, side jobs, or the sale of goods and services, is taxable. You must report all income on your tax return unless it's excluded by law, whether you receive a Form 1099-K or not. The law doesn’t allow taxpayers to avoid taxes on income earned just because they didn’t get a form reporting the payments received.
The reverse is also true: you should alert us if you have received a Form 1099-K but shouldn't have. Either way, good recordkeeping is key to quick resolutions. As in tax preparation, generally, be guided by your tax professional.
Standard Versus Itemized Deductions
Taking the standard deduction is more beneficial than itemizing deductions for many taxpayers. However, the following people can't use the standard deduction:
A married individual filing as married filing separately whose spouse itemizes deductions
An individual who was a nonresident alien or dual-status alien during the year (although some exceptions apply)
Those falling into one of these categories should start organizing paperwork now. Also, they'll want to plan for future years unless they anticipate a status change.
Additionally, if you are eligible to use the standard deduction but anticipate substantial itemized deductions over two years (e.g., medical and/or dental expenses, state taxes, charitable contributions), it may be more beneficial to collect those deductions into this year or next year to the extent they will exceed the standard deduction. The net total for the two years will be a larger deduction than if you take the standard deduction each year. If this is possible, reviewing your situation with a tax professional would be advantageous. Again, get started on the paperwork now.
Retirement Plan Contributions
Each year, you can realize substantial tax savings while also feathering your nest by maxing out deductible contributions to specific qualified retirement plans. The 2024 contribution limit for employees who participated in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan, was $23,000. If you are 50 or over, these amounts are increased by $7,500.
For individual retirement accounts, the limit on the annual deductible contribution was $7,000 for those under 50 and $8,000 for those 50 and older. However, eligibility to deduct retirement plan contributions depended on your income in 2024.
If you qualify, serious consideration should be given to opening a Roth IRA account. While the contributions are nondeductible, subsequent distributions from the Roth IRA are tax-free.
Determining the right retirement plan can be complicated. Reaching out to a retirement plan adviser to help create a personalized plan for your future can save you money and headaches in the long run. It's probably too late to change your situation as we're already into 2025, but it's never too early to plan for 2026. Note that the government may change the limits.
Business Use of Home
Generally, you can't deduct expenses relating to your home. However, special rules allow you to deduct the costs connected to your home's particular business or rental uses, subject to limitations. Calculating the actual expenses can be complex and time-consuming for small-business owners.
As a result, the IRS has provided an optional safe harbor method to reduce the administrative and compliance burdens of determining the deduction. Under this method, the deduction is determined by multiplying a prescribed rate by the square footage of the portion of your home used for business purposes.
Your deductible expense is calculated by multiplying the allowable square footage by $5. The allowable square footage cannot exceed 300 square feet. Thus, the maximum deduction under this method is $1,500. You may, however, be eligible for a larger deduction if you use more than 300 square feet of your home. If that is the case, it would be wise to seek the assistance of a tax professional to help with those complex calculations.
Include Digital Assets
Like previous filing years, you must report all digital asset-related income when you file, emphasizing the IRS. A digital asset is property stored electronically and can be bought, sold, owned, transferred, or traded. Examples include convertible virtual currencies and cryptocurrencies, stablecoins, and non-fungible tokens.
If you had digital asset transactions, keep records that prove their purchase, receipt, sale, exchange, or any other disposition of the digital assets. That includes the fair market value of all digital assets received as income or payment in the ordinary course of a trade or business, as measured in U.S. dollars. This can get complicated, so have records ready to discuss with your tax preparer.
Refund Timing
Several factors can influence the timing of a refund after the IRS receives a tax return. While the IRS issues most refunds in less than 21 days, it advises taxpayers not to depend on receiving a 2024 federal tax refund by a specific date for significant purchases or bill payments. Some returns may require additional review and take longer to process if there are possible errors, missing information, or indications of identity theft or fraud.
Additionally, under the PATH Act, the IRS cannot issue refunds for tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit before mid-February. The IRS must hold the entire refund—not just the portion associated with these credits—until the review is complete.
Watch the Calendar
Even if you suspect you may owe the IRS, you're still better off filing sooner rather than later. When you believe you have all your tax forms, make an appointment with us.
No matter what your tax situation is, a conversation with us could result in tax savings.