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As we move through 2024, there are new tax developments to watch including technology updates, pending tax regulations and the recognition of cryptocurrency on some tax forms.
The Internal Revenue Service (IRS) has been adding new technology systems to ease their processes, including the Information Returns Intake System portal (IRIS), which was introduced a little over a year ago to reduce the overload of paper information reporting forms it needs to deal with every year, as well as the Filing Information Returns Electronically system (FIRE). The adoption of technology does not come without flaws as both of these systems recently experienced glitches and errors.
"IRS systems continue operating well, and the agency has seen a strong, successful testing season in advance of the 2024 tax season opening," the service said in a statement. "The confusion stems from third parties trying to access an IRS system to upload documents on the Filing Information Returns Electronically system. Groups that use FIRE were required to pass higher verification standards before an Aug. 1, 2023, deadline to update their information. The IRS repeatedly urged FIRE users to update their information before the 2024 tax season because they would no longer meet the strengthened security requirements. The IRS emphasizes this is not a widespread issue affecting taxpayers."
Read more: IRS Direct File progresses through internal testing
After a smooth tax filing season last year, the IRS is bracing for potential last-minute tax law changes that could impact this year's tax season as a deal working its way through Congress could revive tax breaks, such as a more generous Child Tax Credit.
The IRS expects more than 128.7 million individual tax returns to be filed by the April 15 deadline, according to the National Treasury Employees Union. They were able to boost their workforce with funds provided by the Inflation Reduction Act of 2022 to add workers answering taxpayer questions over the phone and in person to help taxpayers who are dealing with changes to the Tax Code.
"This year there are more IRS employees standing ready, around the country, to help individuals and businesses navigate the 2024 filing season, which is only possible because Congress and the Biden administration have focused on rebuilding the IRS workforce," said NTEU national president Doreen Greenwald in a statement.
Read more: IRS updates guidance on Obamacare tax credits
This year, the IRS is revising the question it has asked in recent years about income from digital assets, such as cryptocurrency for individual taxpayers this tax season and has also added the question to tax forms for estates, trusts, partnerships and C and S corporations. In addition to answering the question, taxpayers also need to report all the income related to their digital asset transactions.
Employees who were paid with digital assets have to report the value of the assets they received as wages. And if they worked as an independent contractor and were paid with digital assets, they have to report that income on Schedule C (Form 1040), "Profit or Loss from Business (Sole Proprietorship)." Taxpayers also need to use Schedule C if they sold, exchanged or transferred digital assets to customers in connection with a trade or business.
Read more about the developments to watch in 2024 below.
