Preparing for the 2024 Tax Season
Blog post
01/29/25The new year is upon us and with it comes a new tax season. And that brings with it a level of anxiety for many about filing their tax return. To help reduce some of that concern, here are a few suggestions on how to best prepare to file your return for 2024.
Protect yourself from tax scams
The world of tax scams is varied and constantly evolving. Scammers employ numerous tactics to mislead and exploit you, but each scam has the same end goal—tricking you out of your money or sensitive personal information that can be used to steal your identity. Remember, the IRS will never initiate contact with you via email, text message or social media to request personal or financial information. Normally your first contact from the IRS will be via letter.
Here are some of the most common scams:
Phone scams (impersonating IRS agents):
Scammers use spoofed numbers to pose as IRS agents, demanding immediate payment for alleged tax debts and threatening legal action if not complied with.
Phishing emails and fake websites:
These scams involve fraudulent emails or websites designed to steal personal information.
Social media scams:
Scammers use social media platforms to spread misinformation and lure victims into providing sensitive information.
SMS phishing:
Like phishing emails, smishing involves fraudulent text messages that attempt to steal personal information.
Refund scams:
Scammers promise inflated tax refunds or claim to expedite the refund process in exchange for upfront fees or personal information.
Falling victim to tax scams can have severe consequences, including economic loss, identity theft, and significant stress. Scammers can use stolen information to commit further fraud or sell it on the dark web. Victims may face legal and financial repercussions, compounding the impact of the fraud. For the scammers, it is a very lucrative practice, but for the victims, it can be devastating.
Organize your 2024 income tax documents
Gather all your 2024 tax documents and put them in one place. For most people, the important tax documents for reporting income are W-2’s and 1099s. Employers and brokerage houses are required to send W-2’s and 1099s by January 31, 2025. This means that most of you should have all your necessary tax information by mid-February. Also keep expense documents to the extent you intend to use the expense as a tax deduction. If you do not itemize your deductions, which you will not do if your itemized deductions do not exceed the standard deduction, you do not need to keep records for medical expenses, real estate taxes, mortgage interest or charitable donations. Most people now use the standard deduction and do not itemize deductions. The standard deduction for married couples filing a joint return is $29,200 and for individuals it is $14,600. For those of you who are THOR clients, we plan to send a tax organizer to you on or about February 1 to assist you with gathering your necessary tax information.
Maximize your IRA and HSA contributions
If you have an IRA or HSA, make sure you are maximizing your pre-tax contributions to them, or at least as much as your budget allows. Unlike other retirement plans, IRAs and HSAs can be funded for 2024 in 2025 if the contribution is made before the tax filing deadline of April 15, 2025. If you are under 50, you can contribute up to $7,000 to your IRA for 2024 and if you are older than 50 you can contribute an additional $1,000. For HSAs, you can contribute $4,150 if you have an individual high deductible health plan and $8,300 if you have a family high deductible health plan. Like an IRA, if you are over 50, you can contribute an additional $1,000.
File early and file electronically
File your tax return as early as possible. The earlier you file, the sooner you will receive your refund. The IRS will begin accepting 2024 income tax returns on January 27 and the deadline to file is April 15. The fastest way to obtain your refund is to file your return electronically and request that the refund be directly deposited into your bank account – the IRS estimates that refunds are issued within 3 weeks if direct deposit is requested. If a paper check is requested, it may take up to 6 weeks to receive your refund. If you are currently planning to file your return manually, you may want to reconsider and file electronically.
Changes in 2025
Although 2024 did not see any major tax reform legislation, there are still some changes for 2025. Here is a quick review of a few of the more relevant changes for 2025 for you to consider.
Income Tax Brackets
Although the income tax rates did not change, the income tax brackets increased slightly across the board. This increase was brought about by continued inflation in 2024.
Standard Deduction
The standard deduction rises to $30,000 for married couples filing jointly, $15,000 for single individuals and married individuals filing separately.
Retirement Plan Contribution Limits
401(k), 403(b) and 457 plan contribution limits rise to $23,500. Individual retirement account contributions remain at $7,000. There were no changes to the catch-up contribution as it remains at $1,000.
Gift and Estate Tax
The annual gift tax exclusion increases from $18,000 to $19,000. The federal estate tax exemption amount rises to $13,990,000. This exemption amount is scheduled to expire at the end of 2025 if no action is taken in Congress. If no action is taken, the exemption amount will be cut in half to around $7,000,000.
If you have questions and would like to talk with us further, please call us at 513-271-6777. For more THOR reading, click here to go to the Blogs and Market Updates section on our website. Consider following us on social media: