Thanksgiving is a time for reflection – what went well this year and what didn’t go well – so now is the time to start thinking about the approaching tax season and how you could address federal income tax returns for your benefit. The Kaimore community wants to provide you with the tools you will need when handing your federal income tax return. We'll provide you with deductions that fight poverty.
You need to organize and update your tax records. Almost all income can be taxed – there are millions of Americans receiving taxable unemployment compensation – so this information must be included on your tax return to avoid an eye-opener on the due date. If your finances are already in order, the IRS will begin accepting and processing tax returns on January 23.
What happens if you don’t file the proper documents on time without requesting an extension? The IRS can smack you with penalties and interest. You can expect to pay a .5% monthly penalty on the amount due. Next the IRS can penalize taxpayers up to 25% on top of your originally owed taxes plus interest. Make the most of your IRS deductions by requesting an extension if necessary.
When is the deadline for getting tax returns to the federal government? The IRS has set a deadline of April 18. Usually, the deadline is the 15th. However, due to calendar configurations, the due date has been pushed back three days. The IRS offers tips to help people handle tax season. These tips are diverse and they can be applied to several demographics.
Taxpayers must ensure that they have the necessary paperwork before filing – this includes Social Security numbers, Individual Taxpayer Identification Number, Adoption Taxpayer Identification Numbers, and the current Identity Protection Personal Identification Numbers that is valid through the 2023 calendar year.
Most importantly, ensure that you have determined all of your sources of income – unemployment compensation, dividends, pension, annuity or retirement plan distributions, interest received or money earned from the gig economy or digital assets – to avoid complications with the IRS. Deductions - used to put money in your pocket and fight poverty - must disclose all sources of income.
At the beginning of this article, we mentioned giving thanks for positive outcomes because there are offerings to charities that have financial underpinnings including donor-advised funds that allow immediate tax deductions on the amount contributed. Donors contributing cash can take a deduction of up to 60% of adjusted gross income. To fight poverty, the IRS offers taxpayers the opportunity for substantial deductions.
When itemizing money, you can claim charitable contribution deductions for cash donations up to 100% of your adjusted gross income. How do you deduct a charitable contribution? There are key guidelines: the charity must be a qualified organization under tax law and contributions must be paid in cash or property before the close of the tax year to attain deduction thresholds.
What deductions are allowed on a 1040? Deductions include mortgage interest, charitable gifts, unreimbursed medical expenses, and state and local taxes. At the core, deductions are subtractions from your taxable income, and this lowers the amount of money that you owe the IRS.
You can choose the standard deduction or itemized deductions on Schedule A of Form 1040 or 1040-SR. Schedule A is the tax form used by taxpayers who itemize their deductible expenses instead of utilizing the standard deduction. Taxpayers should itemize deductions when the allowable itemized deductions are greater than the standard deduction. If you cannot substantiate all of your charitable contributions with receipts, you will be required to use the standard deduction.
To meet your financial expectations for 2024, you can turn to tax laws that will put money in your pocket, such as the Earned Income Tax Credit (EITC) that offers financial opportunities for people who earn low-to-moderate income. This refundable tax credit depends upon salaries and the number of children in a family - taxpayers with the lowest income and the most children receive the largest credit.
How do you get involved with EITC? (1) you must have a Social Security number; (2) you must have earned income such as wages; (3) you must have an adjusted gross income beneath a given threshold; (4) you must have investment income lower than the threshold.
Fighting poverty is a way of life and, according to the US Census, no government program has been more successful at fighting poverty than the child tax credit. This program has helped to remove more than 2 million children, in recent history, from poverty. The child tax credit provides $2,000 for each child under 17 years old as of December 31, 2022.
How do taxpayers claim the tax credit? Taxpayers can claim the credit by listing your eligible children on a Form 1040 and attaching a completed Schedule 8812. If you live in Los Angeles, Kaimore offers free tax preparation for all low-income individuals and families. Kaimore serves the unhoused and transitional community members by popping up on the streets around Los Angeles. Kaimore also helps people by scheduling appointments at their Main Office Clinic.
While Inflation continues to permeate through the economy, the Inflation Reduction Act became law in August 2022 to offer tax benefits for products related to energy efficiency and health care. The solar energy credit increases to 30% if consumers purchase residential efficient products such as solar panels and solar water heaters between January 1, 2022 through December 31, 2032.
Energy efficient measures have spread to the auto industry and, because of the Clean Vehicle Credit, consumers not only have an opportunity to save money on gas, they can also lower their taxes by up to $7,500 when purchasing a new electric vehicle. Used electric vehicles are involved as well. These vehicles could be eligible for a credit of 30% of the sales price. The ceiling for this credit goes up to $4,000 depending upon income.
Another category that assists taxpayers with deductions is health care products. Since 2018, the IRS provides taxpayers with the ability to deduct medical expenses. Taxpayers can claim deductions when unreimbursed medical expenses add up to more than 10% of their adjusted gross income. Hold onto your receipts if you or your dependents have been hospitalized or have had other costly medical or dental expenses because the price of these procedures can be deducted upon proof of the procedure.
Taxpayers qualify for credits when they receive treatment from any of the following practitioners: doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and other professionals. Medical equipment can be deducted as well - this includes dentures, reading glasses, contacts, hearing aids, crutches, wheelchairs, and service animals. Hopefully, the information in this article gives you a blueprint for financial well-being through donations and deductions. Utilize these programs to make 2024 better than 2023. These programs can give you reasons to be thankful.