CONNECTICUT, USA — With a new year comes tax season. It officially begins Monday, and you may notice some changes this year.
The Internal Revenue Service (IRS) expects more than 128.7 million tax returns to be filed by the April 15 tax deadline.
The agency made the announcement as it undergoes a massive overhaul, attempting to improve its technology and customer service processes with tens of billions of dollars allocated through the Democrats’ Inflation Reduction Act, signed into law in August 2022.
“As our transformation efforts take hold, taxpayers will continue to see a marked improvement in IRS operations in the upcoming filing season,” said IRS Commissioner Danny Werfel in a news release. “IRS employees are working hard to make sure that new funding is used to help taxpayers by making the process of preparing and filing taxes easier.”
Agency leadership says this year, more walk-in centers will be open to help taxpayers, enhanced paperless processing will help with IRS correspondence and enhanced individual online accounts will be available for taxpayers.
Additionally, eligible taxpayers can file their 2023 returns online directly with the IRS through a new, electronic direct file pilot. The IRS says it will be rolled out in phases and is expected to be widely available in mid-March.
The IRS expects most refunds to be issued in less than 21 days.
Some people could save on taxes this year because the IRS adjusted several of its provisions in 2023 for inflation.
Among those adjustments are increasing its tax brackets by about 7% to help people avoid "bracket creep." That's when people get pushed into a higher tax bracket because of inflation without real change in their earnings. The adjustments mean people could see a smaller tax bill or a larger refund.
Something else to look out for is an increase in standard deductions.
Tim Baker, the founder and CEO of Metric Financial, LLC, said that in 2017, under the Tax Cuts and Jobs Act, the standard deduction was raised "pretty significantly," and so after 2025, taxpayers will have to consider itemizing. Now, taking advantage of the higher standard deduction is still advised.
"With regard to changes in the tax brackets, it's all about if you "x" amount of dollars, you get pushed into a new tax bracket," said Baker. "The IRS is now changing those thresholds, so even if you make more money, you may not get pushed into that next tax bracket because they're making inflation adjustments to it."
Baker also said people should think about taking an inventory of investments.
"If you have investments outside of an IRA and they're mutual funds, mutual funds have a tendency to kick off capital gains distributions every year even if you didn't sell anything," Baker said. "It's always a good time to think about maybe there are some opportunities to move away from mutual funds."
The IRS was slammed with massive backlogs of paper tax returns in previous years. In June 2022, the IRS faced more than 21 million backlogged paper tax returns, with National Taxpayer Advocate Erin Collins stating at the time: “The math is daunting.”
Now, with increased funding, the IRS expects a smoother filing season with fewer backlogs, but now it is seeing persistent threats of funding cuts.
Last year’s debt ceiling and budget cuts deal between Republicans and the White House resulted in $1.4 billion rescinded from the agency’s original $80 billion allocation through the Inflation Reduction Act and a separate agreement to take $20 billion from the IRS over the next two years and divert those funds to other non-defense programs.
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Jennifer Glatz is a digital content producer at FOX61 News. She can be reached at jglatz@fox61.com.
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