Tax credits and deductions for individuals
Tax credits and deductions change the amount of a person's tax bill or refund. People should understand which credits and deductions they can claim and the records they need to show their eligibility.
Tax credits
A tax credit reduces the income tax bill dollar-for-dollar that a taxpayer owes based on their tax return.
Some tax credits, such as the Earned Income Tax Credit, are refundable. If a person's tax bill is less than the amount of a refundable credit, they can get the difference back in their refund.
To claim a tax credit, people should:
- Keep records to show their eligibility for the tax credits they claim.
- Check now to see if they qualify to claim any credits next year on their tax return.
Deductions
Deductions can reduce the amount of a taxpayer's income before they calculate the tax they owe.
Most people take the standard deduction. The standard deduction changes each year for inflation. The amount of the standard deduction depends on a taxpayer's filing status, age and whether they're blind and whether the taxpayer is claimed as a dependent by someone else.
Some people must itemize their deductions, and some people may choose to do so because it reduces their taxable income more than the standard deduction. Generally, if a taxpayer's itemized deductions are larger than their standard deduction, it makes sense for them to itemize.
Interactive Tax Assistant
Find help with tax questions based on specific circumstances with the Interactive Tax Assistant. It can help a person decide if they're eligible for many popular tax credits and deductions.
Businesses can file Form 1099 series information returns for free
Business taxpayers can file electronically any Form 1099 series information returns for free with the IRS Information Returns Intake System (IRIS). IRIS accepts 1099 series forms for tax year 2022 and after. IRIS is available to any business of any size. It's secure and accurate and it requires no special software. It also reduces the need for paper forms.
Starting in tax year 2023, businesses with a combination of 10 or more information returns must file them electronically.
With IRIS, business taxpayers can:
- Enter information into the portal or upload a file with a downloadable template in IRIS.
- Download completed copies of Form 1099-series information returns.
- Submit extensions.
- Make corrections to information returns filed with IRIS.
- Get alerts for input errors and missing information.
- Get a confirmation in a little as 48 hours that the IRS received the return.
- Reduce expenses on paper, postage, storage space and trips to the post office.
1099-K reporting threshold delayed for third party platform payments
The IRS delayed the new $600 Form 1099-K reporting threshold requirement for third party payment organizations for tax year 2023. For 2023 and prior years, payment apps and online marketplaces are required to send out Forms 1099-K only to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in the new reporting requirements.
Time to renew Preparer Tax Identification Numbers by Dec. 31
Paid tax return preparers with a PTIN expiring on Dec. 31, 2023, need to renew their PTIN with the online renewal process. It takes about 15 minutes to renew online.
Anyone who's paid to prepare or helps prepare any U.S. federal tax return or a claim for refund must have a valid PTIN from the IRS. All 2023 PTINs will expire Dec. 31, 2023. The non-refundable fee to get or renew a PTIN is $19.75 for 2024.
While it is faster to renew online, paid tax return preparers can also renew their PTINs with Form W-12, IRS Paid Preparer Tax Identification Number Application and Renewal. It can take up to six weeks to process paper applications and renewals.
Renew a PTIN online
To renew online with IRS.gov/taxpros:
- Select the "Renew or Register" button.
- Login with a user ID and password.
- Select "Renew my PTIN" from the main menu.
Apply for a PTIN online
To apply online as a first-time applicant with IRS.gov/taxpros:
- Select the "Renew or Register" button.
- Select "Create an Account" and follow the prompts to get a temporary password.
- Login with the user ID and emailed temporary password and follow the steps.
- Select "Register for a PTIN" from the main menu.
Enrolled agent credential
The enrolled agent credential is an IRS certification for tax professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation and representation matters. Enrolled agents have unlimited rights to practice before the IRS, which allow them to represent any client on any tax matter.
Program for non-credentialed tax return preparers
The IRS encourages non-credentialed tax return preparers to take continuing education courses to increase their knowledge and improve their filing season readiness.
Non-credentialed tax return preparers who participate in the IRS Annual Filing Season Program get educational credits, and the IRS includes them in a directory of return preparers on the IRS website. Taxpayers can use the IRS directory to find tax return preparers in their area who have completed the program or hold professional credentials recognized by the IRS. The Annual Filing Season Program is voluntary for tax return prepares who aren't enrolled agents, attorneys or CPAs.
Employers should certify employees before claiming the Work Opportunity Tax Credit
Employers who hire people from certain groups can reduce the tax they owe when they claim the Work Opportunity Tax Credit on their federal tax return. This credit encourages employers to hire workers certified as members of any of ten groups facing barriers to employment. When hiring, employers may want to take a moment to review eligibility requirements for the Work Opportunity Tax Credit.
Pre-screening and certification requirement
To claim the credit, an employer must first get certification that an individual is a member of one of the specified groups. They do so by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to their state workforce agency within 28 days after the eligible worker begins work. Employers should not submit this form to the IRS. They should contact their state workforce agency with any questions about the processing of Form 8850.
Figuring and claiming the credit
Eligible employers claim the Work Opportunity Tax Credit on their federal income tax return. It is generally based on wages paid to eligible workers during the first year of employment. After the employer receives Form 8850 certification, they figure the credit on Form 5884, Work Opportunity Credit, and then claim the credit on Form 3800, General Business Credit.
Special rule for tax-exempt organizations
A special rule allows tax-exempt organizations to claim the credit only for hiring qualified veterans who began work for the organization before 2026. After the employer receives the Form 8850 certification, these organizations claim the credit against payroll taxes on Form 5884-C, Work Opportunity Credit for Qualified Tax Exempt Organizations.
Credit limitations
For a taxable business, the credit value is limited to the business' income tax liability.
For qualified tax-exempt organizations, the credit is limited to the amount of employer Social Security tax owed on wages paid to qualifying employees.
IRS reminds extension filers to have all their info before visiting a tax professional
The deadline is around the corner for taxpayers with an extension to file. It's important for taxpayers to gather all their records and get copies of any missing documents before they sit down to prepare their return, and taxpayers who use a professional tax preparer should make sure they have all their information ready before their appointment. This helps them file a complete and accurate tax return.
Here's the information taxpayers may need. Not all information applies to all taxpayers.
- Social Security numbers of everyone listed on the tax return.
- Bank account and routing numbers for direct deposit or information to make a tax payment.
- Forms W-2 from employer(s).
- Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
- Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
- Form 1099-INT for interest received.
- Other income documents and records of virtual currency transactions.
- Form 1095-A, Health Insurance Marketplace Statement.
- Information to support claiming other credits or deductions such as receipts for child or dependent care, college expenses or donations.
Missing documents: What taxpayers should do
To request a missing W-2 or Form 1099, taxpayers should contact the employer, payer or issuing agency. This also applies for taxpayers who received an incorrect W-2 or Form 1099.
If they still can't get the forms, taxpayers can complete Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. If a taxpayer doesn't receive the missing or correct form in time to file their tax return, they can estimate the wages or payments made to them and any taxes withheld. They can use Form 4852 to report this information on their federal tax return.
Find an authorized e-file provider
For help finding a tax professional, taxpayers can use the Authorized IRS e-file Provider Locator Service. This is a nationwide listing of all businesses that the IRS has authorized as an IRS e-file provider. They're qualified to prepare, transmit and process e-filed returns.