IRS Issues New Alert on 5 Things You Must Declare on Your Taxes This Year
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Most of us are not exactly tax experts , even if we’ve been filing an annual return for decades. Tax codes tend to be complex, and they also can change at least a little every year, making it harder for the average person to keep up. To help you avoid having to wade through confusing regulations yourself, the Internal Revenue Service (IRS) gives regular guidance to taxpayers on its website. In a Jan. 30 press release , the IRS offered new advice on the things you must declare on your taxes this year.
“Remember to report all types of income on the tax return,” the agency warns. “This is important to avoid receiving a notice or a bill from the IRS.”
According to the IRS, there are five types of income you may need to declare on your 2023 return: goods created and sold on online platforms; investment income; part-time or seasonal work; self-employment or other business activities; and services provided through mobile apps.
“The IRS receives information from third parties, such as employers and financial institutions,” the agency states on its website . “Using an automated system, the Automated Underreporter (AUR) function compares the information reported by third parties to the information reported on your return to identify potential discrepancies.”
If you don’t declare everything, the IRS will send you a Notice CP2000, which is a Notice of Underreported Income. “The CP2000 isn’t a bill, it’s a proposal to adjust your income, payments, credits, and/or deductions,” the agency explains. “The adjustment may result in additional tax owed.”
But you might not only be facing a bill for the taxes you originally owed in this case: Taxpayers can also be charged a penalty for a number of different reasons, including filing an inaccurate return. If you don’t declare all your income, you may get hit with an accuracy-related fine from the IRS as well. For a substantial understatement of income, you could be looking at a penalty worth an additional 20 percent of your underpaid taxes.
“You can avoid a penalty by filing your tax return accurately,” the IRS advises on its website.
Of course, accurately declaring all your income is not the only thing you need to take into consideration during this filing season. In order to “help make tax preparation smoother in 2024,” the IRS also provided taxpayers with a checklist of other things to remember when filing their returns. Read on for five more tips from the agency.
RELATED: IRS Announces Major Tax Filing Changes—Are You Affected?
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Before you begin preparing your return, the IRS says you need to gather all necessary tax paperwork and records. This will help you avoid missing any deductions or credits, as well as file a complete and accurate tax return.
“Errors and omissions slow down tax processing, including refund times,” the agency warns.
Not sure what all you need? According to the IRS, taxpayers should have the following information and documents prior to starting their taxes: Social Security numbers for everyone listed on the tax return; bank account and routing numbers; various tax forms such as W-2s, 1099s, 1098s and other income documents or records of digital asset transactions; Form 1095-A, Health Insurance Marketplace statement; and any IRS letters citing an amount received for a certain tax deduction or credit.
RELATED: IRS Warns 20% of Taxpayers Don’t Claim Major Refund Credit—Are You Eligible?
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If you’re particularly worried about potential refund wait times, the IRS says it is crucial that you file your return electronically with direct deposit. This is “the fastest way to receive a refund,” according to the agency.
“Avoid paper returns,” the IRS advises.
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Don’t forget to go online for free help as well. The IRS wants to remind people there are free resources available to help eligible taxpayers file online. This includes the agency’s Free File , which is a “free online alternative to filing a paper tax return” that is available to any individual or family who earned $79,000 or less in 2023.
RELATED: Don’t Want to Pay for TurboTax? These 5 Tax Filing Software Are Free .
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The IRS says it is also important for people to think about how they want to file their taxes—whether that’s personally filing taxes, using online filing services, or hiring a tax professional.
“Each one has its own benefits,” the agency notes. “Taxpayers should decide based on their personal situation and comfort level with tax preparation.”
But if you are hiring a tax professional, the IRS urges you to choose one carefully.
“Most tax return preparers are professional, honest and provide excellent service to their clients. However, dishonest tax return preparers who file false income tax returns do exist,” the agency cautions.
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With its final tip, the IRS reminds taxpayers that contacting the agency for help through a phone call may not be the fastest or most effective option. After all, call wait times can skyrocket during tax season thanks to an increase in demand.
“Don’t wait on hold when calling the IRS,” the agency shares. “Use online resources at IRS.gov to get answers to tax questions, check a refund status or pay taxes. There’s no wait time or appointment needed—online tools and resources are available 24 hours a day.”
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you’re spending, saving, or investing, always consult your financial advisor directly.
- Source: IRS: Things to remember when filing 2023 tax returns
- Source: IRS: Topic no. 652, Notice of underreported income – CP2000
- Source: IRS: Penalties
- Source: IRS: Accuracy-related penalty
- Source: IRS Free File: Do your taxes for free
IRS Announces Major Tax Filing Changes for Next Year—How You Can Benefit
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Filing your taxes may be the one thing you count on doing every year, but it might not always be the same process. Even when you haven’t had a major life change such as getting married or starting a new job, the Internal Revenue Service (IRS) still makes adjustments to the process that can affect how you submit your paperwork. In fact, those who are already getting everything in order ahead of the deadline might want to take note after the IRS announced a major set of tax filing changes for next year. Read on to see how you can benefit from the latest update.
RELATED: IRS Warns That Claiming These Credits Can Get You Audited and Fined .
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While plenty of people choose to file their taxes online , the process can still involve a decent amount of physical paperwork for some who require extra forms or documentation . But if you’ve had to rely on the postal service to get everything in on time in the past, you can breathe a sigh of relief.
In a Nov. 7 press release, the IRS announced that it had reached its goal of implementing the Paperless Processing Initiative three months ahead of schedule. The program, which was announced in August, makes it possible for taxpayers to submit all correspondence and responses to notices using a Document Upload Tool on the agency’s website.
The new service provides another significant upgrade from the latest changes released last February, which made the nine most common correspondences available for digital reply, Yahoo Finance reports. The prior system relied entirely on using physical mail to conduct business.
Not only will the new system cut processing time in half, but the agency also says the program will help save over 200 million pieces of paper each year. And while the IRS estimates that 94 percent of individual taxpayers will no longer need to use the mail, those who choose to file through the post will still be able to if they choose to do so.
RELATED: IRS Issues New Alert on What You Must Do Before the Year Is Over .
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If there’s any silver lining to paying your taxes, it’s getting a refund down the line. Now, those who are anxious to see some of their cash come back can get a better idea of when it’s coming thanks to the agency’s newly improved Where’s My Refund tool.
According to the IRS announcement, taxpayers will be able to use the online feature to check the precise status of their refund, as well as find out if they need to respond to an agency request for more information. Previously, the tool provided a generic message that didn’t offer any specific information about a person’s filing.
The tool has seen plenty of use in the past, with about 54 million taxpayers using it to generate 550 million hits in 2022, per the IRS. The agency says the detailed updates will likely reduce the number of phone calls made to the IRS for refund status inquiries.
RELATED: 4 Warnings About Using TurboTax, According to Experts .
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When you’re looking for a quick answer to your questions while preparing your taxes, nothing beats the efficiency of a phone call. This year, the agency says it is continuing with improvements it’s made to its phone service to make the service even more accessible.
The agency says it plans to reach at least an 85 percent level of service once again during the 2024 filing season, carrying over improvements made to the system during last year’s filing brought about by hiring a stable of new representatives, per the press release. The IRS will also aim to have an average wait time of five minutes or less and offer a call-back option if the projected wait time is longer than 15 minutes.
RELATED: If You Already Did Your Taxes, You May Need to File an Amended Return, IRS Warns .
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Those who want some in-person help will also see some improvements. The agency says it is opening or has reopened 50 Taxpayer Assistance Centers nationwide and will be increasing the number of available hours for assistance by more than 8,500 hours. The complete list of locations and reopening dates can be found in the press release.
The IRS also says it will be rolling out more pop-up centers and aims to increase the number of taxpayers receiving free in-person preparation assistance by 50,000 returns. All told, some experts think the updates could help smooth out what can be a notoriously tricky and confusing process.
“I think these changes are good news,” Grant Dougherty , enrolled agent and founder of Dougherty Tax Solutions, told Yahoo Finance. “Anytime the taxpayer experience can be improved, I think it’s always a win for everyone involved. I do believe the [2024 filing season] will be a little smoother.”
