New IRS rules for collecting taxes: what they are and how they affect me
As the year winds down the IRS prepares for a new tax season. Get a jump on preparing your tax return. These are the new rules and how they may affect you.
As the year draws to a close, the Internal Revenue Service (IRS) gears up for a new tax season , which will take place during the first quarter of next year.
Although there is still some time before tax season begins, the truth is that tax planning can be very helpful if you want to file an accurate return and avoid delays, especially now that the government agency in charge of collecting taxes has announced new rules.
Below are new steps to consider during your 2023 tax filing.
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New IRS rules for collecting taxes: What are they and how do they affect me?
By 2023, more taxpayers will receive Form 1099-K due to an important change: From now on, every transaction that exceeds $600, including third-party networks that process payments for those doing business, must be reported to the Internal Revenue Service through form 1099-K. It is worth mentioning that gifts or personal reimbursements received through third-party payment networks are not subject to tax.
Unlike taxes filed during the first quarter of this year, previously the Form 1099-k was only issued if the total number of transactions exceeded 200 for the year for transactions that exceeded $20,000 in aggregate.
Another important change to consider are tax credits, since some of these will return to 2019 levels; which means that their beneficiaries will be affected receiving a lower payment compared to the amount for the previous year.
The changes include the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC), and the Credit for Child and Dependent Care. The figures for 2023 are as follows:
- Taxpayers who received $3,600 per dependent for CTC, will now receive $2,000, if eligible
- Taxpayers who received $1,500 per dependent in the EITC, will now receive $500, if eligible
- Taxpayers who received $8,000 per dependent in the Child and Dependent Care Credit, will now receive a maximum of $2,100, if they are eligible
It should be noted that the IRS does not issue tax refunds to taxpayers who claimed the EITC or the Additional Child Tax Credit (ACTC) before mid-February, as the law requires withholding the entire payment until after that date.