Tax season starts today – and things are different this year: Here are six key changes you MUST know about

The Internal Revenue Service (IRS) officially begins accepting tax returns today – marking the start of tax season.

In addition to making sure you’re aware of the specific tax laws in your state, experts urge Americans to review any major changes that have occurred in the year since they last filed a federal return .

For the 2023 tax year, there have been adjustments to the IRS programs, an expansion of tax brackets and an inflation-adjusted increase in the standard deduction.

A possible last-minute change in legislation – including an expansion of the child tax credit – could also affect your 2023 tax return.

Here are six changes you need to know about as tax season kicks off.

Increase in tax brackets

When comparing the 2023 tax year to the 2022 tax year, there was a big change in the federal income tax brackets.

Although tax rates did not change, tax rates increased by about 7 percent. This was a larger easing than usual, as a result of forty years of high inflation in 2022.

This means that higher incomes fall into lower brackets than in previous years, resulting in less income tax being paid.

For example, a taxpayer whose income hasn’t really changed from last year could get a larger refund, tax preparation firm Jackson Hewitt told me. Fortune.

For example, in tax year 2022, the 24 percent marginal rate for individual filers was applied to taxable income from $89,075 to $170,050.

For the 2023 tax year, it will apply to taxable income from $95,375 to $182,100 – meaning more than $6,000 has been shifted to a lower bracket.

For example, someone making $95,000 will pay hundreds of dollars less in federal taxes this year than last year.

Larger standard deduction

The standard deduction – which has also been adjusted for inflation – has also increased by about 7 percent from tax year 2022.

It is $13,850 for single filers and $27,700 for married, joint filers.

Taxpayers claim the standard deduction to reduce their income by a predetermined amount.

But some taxpayers choose to itemize their deductions if they think the total will be greater than the standard deduction.

This tax year, Americans who are over 65 or blind will have certain requirements criteria as described by the IRS are now also eligible for an additional standard deduction.

The additional standard deduction is $1,850 for single filers or those filing as head of household, and $3,000 for married couples filing jointly if each spouse is over age 65.

This increases the total amount to $15,700 for single filers and $30,700 for married couples.

Go to the Free File program

The IRS has raised the income limit for her Free file program for tax year 2023 – an increase of $6,000 from last year to an adjusted gross income of $79,000 or less.

IRS Free File connects taxpayers with tax preparation and filing software companies that offer free online tax preparation and filing.

Direct File pilot

This tax year, the IRS is also testing one Instant file program – which is different from the Free File program.

The program allows eligible Americans to file their federal returns directly with the IRS at no cost.

The pilot is currently open to eligible taxpayers in twelve states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.

The agency said qualified Americans must also report certain types of income, credits and deductions.

The pilot is initially limited to federal and state employees with relatively simple returns.

But the IRS is expected to open the program to private sector workers in the dozens of eligible states in mid-March.

IRS 1099-K form changes have been delayed

Last November, the IRS announced that it had postponed a major rule change that would impact Americans who earn through payment apps like Venmo, Cash App or PayPal or sites like eBay and Etsy.

The rule would have meant that Americans who earned $600 or more from selling goods and services would have had to report it using a 1099-K form, which reports business payments to the IRS.

But the statutory body said the rule would remain unchanged for the 2023 tax year – so only those who receive more than $20,000 and have more than 200 transactions should report.

The law mainly affects gig economy workers, such as hairdressers, taxi drivers and delivery people, who can receive tips through such apps.

IRS officials say one reason for the delay is taxpayer confusion about what types of transactions can be reported.

For example, peer-to-peer transactions, such as selling a sofa or car, sending rent to a roommate and buying concert tickets, would not have to be reported, while other purchases would apply.

“This phased approach is the right thing to do for tax administration, and it avoids unnecessary confusion,” said IRS Commissioner Danny Werfel.

Even though the IRS has postponed the rule change, you may still receive a 2023 1099-K in the coming weeks from a third party that paid you through an online platform.

Make sure all reported transactions reflect business transactions and not personal assets, Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals, told CNN.

If the form includes some personal transactions, include all of the information from your 1099-K on your return, but exclude those personal transactions and include a note alerting the IRS that the amount you deducted is not business income, advised O’Saben.

Keep in mind that whether or not you receive a 1099-K, you must legally report all taxable income on your federal income tax return.

Proposed changes to the child tax credit

Although tax season is now officially underway, Congress is discussing legislative changes, including an enhanced child tax credit.

If approved, the bipartisan tax deal would benefit about 15 million children in the U.S. — and in return, provide companies with a number of tax breaks.

Lawmakers tried to make the changes before tax season started.

Some have suggested that if the bill becomes law this tax season, filers may have to amend their returns. Others have said it could be applied retroactively to 2023 tax returns if it passes in the coming weeks.