Financial advisers usually tell you that it’s bad to get a big tax refund. A refund, after all, is money you paid the government that you didn’t owe. You could have used that money during the tax year instead of giving it to Uncle Sam in the form of an interest-free loan.
If taxpayers have heard that advice, most have probably just nodded along and continued making plans for spending their tax refund. An estimated 75 percent of taxpayers will get a refund during the current tax year, and those refunds will average $2,700 apiece.
The IRS says the key to getting your tax refund fast is to file early — and file electronically. Typically, you can get a refund within 21 days after the IRS has accepted the return, provided there are no mistakes on the tax form.
Here are 10 things every taxpayer needs to know about filing taxes this year.
Believe it or not, federal income taxes haven’t been due on April 15 since the 2019 filing season, thanks to various holidays, quirks of the calendar and other unusual events, (think: pandemic). For the 2024 filing season, however, the deadline is April 15 — with a few exceptions.
If you lived in a declared disaster area, the IRS may have given you an extension. You can find the areas with extensions available through the IRS. Residents of Maine and Massachusetts have until April 17 due to respective state holidays.
You can get an automatic filing extension for your 2023 tax return until Oct. 15. All you have to do is fill out and file IRS Form 4868 by April 15. The catch – and it’s a big one – is that you must pay your taxes by April 15, even if you have an extension. But you’ll dodge the failure to file penalty, which is much higher than the failure to pay penalty.
The penalty for late filing is 5 percent of the amount due each month, and the failure to pay is 0.5 percent a month, and maxes out at 25 percent. (When both penalties are levied in the same month, the total penalty is 5 percent a month: 4.5 percent for failure to file and 0.5 percent for failure to pay.) You’ll also owe 8 percent interest on the unpaid taxes.
If you’re having trouble reading IRS Form 1040 — your main income tax form — consider IRS Form 1040 SR, U.S. Tax Return for Seniors, which is designed for older taxpayers with aging eyes. The form has larger type than the regular 1040. It also has a chart for calculating your standard deduction — a good way to ensure that taxpayers 65 and older take the larger standard deduction to which they are entitled.
The standard deduction reduces your taxable income — and by quite a lot. The standard exemption for single filers and for those who are married but filing separately is $13,850 in the 2023 tax year, up $900 from the 2022 tax year. For married filers, the standard exemption is $27,700, up $1,800 from 2022.
The standard deduction gets even better if you’re 65 or older. Each joint filer 65 and older can increase the standard deduction by $1,500, for a total of $3,000 if both joint filers are 65-plus. In total, a married couple 65 or older would have a standard deduction of $30,700. Single filers 65 or older get an extra $1,850 standard deduction.
One thing that’s not so swell about the standard deduction: It makes it harder to claim itemized deductions, such as charitable donations. A married couple who are both 65 or older would need $30,700 in deductions to make itemizing worthwhile.
In the 2021 tax year, a married couple could deduct $600 of charitable gifts without itemizing. Sadly, that deduction has vanished from the tax code.
You can still take some deductions without itemizing, thanks to above-the-line deductions (known to the cognoscenti as “adjustments to income.”) The line in question is Line 12 on the 1040 form, where you would put itemized deductions if you had any. But if you look above Line 12, you’ll see a host of above-the-line deductions, such as:
The IRS says it usually takes three weeks to get your return if you file electronically. In these days when you can use your bank card in Siberia, three weeks might seem a bit slow. And it is. But you’ll have to wait at least four weeks to get your return if you file by paper. And if your return requires corrections, you might have to wait longer.
If someone has stolen your identity, they can steal your tax return too. All they have to do is file before you do, and your refund check will soon be winging its way over to them. Getting that corrected will take much longer than just filing a return.
If you’re worried about identity theft or tax fraud, ask the IRS for a personal identification number (PIN). It can help keep a fraudster from getting a new set of tires with your refund.
No more lonely treks to the mailbox every day to see whether your refund is there. (Or, in this modern world, forlornly refreshing the screen on your bank’s website every three minutes to check whether you’re suddenly richer.)
A better way: Use the IRS “Where’s My Refund?” tool online. Once you’ve signed up, you can virtually watch your tax return go through the tax system. You can use the time you’ve saved dreaming about what to spend your refund on.
You can get free tax help in a number of places, including:
AARP Foundation Tax-Aide is targeted at older taxpayers with low to moderate income. The free service will be live in early February; you can find Tax-Aide locations through the IRS or through AARP.
The IRS Volunteer Income Tax Assistance (VITA) offers free tax help for taxpayers who qualify at thousands of sites across the country. Typically, those who qualify make $64,000 or less. You can also get free tax software from many different companies, provided your adjusted gross income is $79,000 or less. (Adjusted gross income is your income minus deductions, or “adjustments” to income that you are eligible to take). The companies guarantee accurate computations, and some also offer free state tax return software. You can find the free software through the IRS.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
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