Ep. 119 | 2024 Tax Year Filing Updates
Download MP3Welcome back to the teaching tax flow podcast, everybody. Episode 119. On this episode, we are gonna look at some tax filing updates for the year 2024. But before we do that, as always, let's take a brief moment and thank our episode sponsor.
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John Tripolsky:Alright, everybody. Here we are again looking at some updates that we have, this time at 2024 tax filing year. So if we're looking back, obviously, you're listening to this here in 2025. Congratulations. You survived the new year.
John Tripolsky:We're looking at when it comes to filing your taxes this year for last year. So if you heard that, I'll say it one more time, what you're going to be filing this year for your 2024 activities. So as always, Chris Bucchero, welcome back to the show, sir. How are you?
Chris Picciurro:I am wonderful. Good to see you again, Johnny t.
John Tripolsky:Hey. I I survived the New Year. You survived the New Year. We got a couple episodes in. I'd say we're doing alright.
Chris Picciurro:We are doing great. We are starting to get to that point where many taxpayers are compiling their information to have the 2024 tax return prepared. We are still under the Tax Cuts and Jobs Act of 2017, so there aren't too many major major changes, but there are some things you wanna be aware of for the 2025 tax preparation year, now that we're in 2024. So what we wanna do this podcast talking through those 2023 to 2024 changes, and, you know, the teaching tax law team is gonna keep you abreast of any major developments in tax law, as the new administration comes in as well throughout 2025. But let's this is kinda that peak time of year where you're seeing all the commercials online about tax preparation and people dancing on the side of the street waving in, of course, you know, or you could be a self preparer, or you can have a very, excuse me, complicated situation.
Chris Picciurro:The bottom line is let's look at these changes from 23 to 24 and break them down for our listeners.
John Tripolsky:Absolutely. Especially if you, know, you mentioned the commercials that everybody's seen, especially if you stream some things and you have, I can't remember which platform. I've just seen it on over the over the weekend, but it's like you get the same commercial not once, but, like, 4 times in a row. You're like, just get out of the way. I get the point.
John Tripolsky:So we promise to not repeat ourselves as much as that, but some of
Chris Picciurro:the stuff here kinda, you
John Tripolsky:know, peeks its head up a couple
Chris Picciurro:times. Other than sports, pretty much my wife and I watch everything on demand. Most of it we record so we could whip through those commercials. But once in a while, we'll find a new show or we get caught up on stuff, which is rare. And we we get go into a show where we have to watch the commercials, and you're right.
Chris Picciurro:On some of these streaming services, you will literally see the same commercial back to back where they have it might be an hour show, and they have 3 total commercials. They just go, you know, it's funny though because then then we kinda make a joke of it and say, well, wait a second. Why is, why is every commercial about some type of weight loss thing? You know, it's like, are we the really target market of who they're trying to see right now? Right.
Chris Picciurro:Right.
John Tripolsky:Can I get what you're talking about at least what we're talking about here applies to everybody as long as you pay taxes in the in the country itself?
Chris Picciurro:This does apply to everyone. So let's start off with no. The first one is gonna be adjustments to the standard deduction. So married filing we know that with the and there's an episode on itemized deductions versus standard deduction, but we know that everyone's entitled to a standard deduction on their tax return, and if your itemized deductions, which are reported on schedule a, exceed the standard deduction, then you should take the itemized deductions. That being said, the standard deduction with tax cuts and jobs that got significantly raised, and now it's at the highest level that I've ever seen, maybe in the history.
Chris Picciurro:It's probably the highest level ever. I mean, for so for married filing jointly, your standard deduction's $29,200, that's up from 277 in 2023. Single filers are at 146 or half that, and then a household, 21,009. So those increases were pretty significant. Typically, these standard a lot of the, adjustments that we're talking about and changes are linked to cost of living adjustments.
Chris Picciurro:We did see, a lot more inflation, in, you know, 2024, and some of these things are are reflected in that.
John Tripolsky:And, Chris, before we go on to another one too, just to clarify for some people that may have, you know, not listened to every show that we've done. If you haven't, shame on you. We should be following this. But what exactly so we mentioned married, filing jointly, single filers, and head of household. What exactly qualifies as a head of household when it comes to filing?
Chris Picciurro:Typically, a head of household is gonna be someone that is unmarried, yet has a qualifying dependent, and it doesn't necessarily have to be a child. It actually could be a parent in some situations, but the vast majority ahead of household is gonna be someone that's unmarried, and they have a dependent. So
John Tripolsky:Excellent.
Chris Picciurro:Typically, it's gonna be a child. Mhmm. For sure. Yeah. Absolutely.
Chris Picciurro:So so the you see these standard deductions getting higher. We also saw the tax brackets adjusting. Right? So 37%. Well, it's just because there are tons of tax brackets.
Chris Picciurro:And, you know, John, one of the most important things we talk about is your marginal tax rate is more important than your tax bracket. But let's just talk that 37% tax bracket, which is the highest tax bracket, now gets triggered, for single filers at anything over $609,000 up from 578,000 ish in 23, and 731,000 for married couples filing jointly up from 6.93. So, again, those are pretty big jumps in in really, it's related to the, you know, related to the inflation situation.
John Tripolsky:And over history, I don't know the answer to this one, but, you know, I feel like, at least in recent history, we've always seen increases in those. Have there ever been times previously that you know of where it's gone down?
Chris Picciurro:I've never I not that I know of. Mhmm. I just thought about what's going on. Maybe it's stayed consistent, but that's a good question. Probab but not not to not to my memory where that's got actually gotten decreased.
Chris Picciurro:Now if tax cuts and jobs act gets reduced or does go go away, which it's scheduled to, then we're gonna see the standard deductions go back down to pre tax custom jobs act, levels, but you would also have some other deductions. Then you would see more people itemizing in the state and local income tax might be more generous. So now another thing we talk about is the 10.99 k. Now you know I'm very privileged to be part of the National Association of Tax Professionals and be one of the tax season update instructors, and I've had you know, it's really humbling and an honor to to be able to teach hundreds of other tax professionals this last winter. One of the things we talked about was the 10.99 k threshold changing.
Chris Picciurro:I call this, the Taylor Swift rules. Right? And maybe it's not appropriate because her her, you know, her con her her concerts or her tour is gone. So maybe I'm gonna change this, to the cub scout parent rule. What do I mean by that?
Chris Picciurro:Well, John, you know when we go to the grocery store, and I was a cub scout for many years, that the cub scouts sell popcorn. Right? And that's one of their fundraise. You can say the girl scouts sell cookies. And what happens a lot of times is that one of the the leaders in the den or the pack or whatever the, you know, the group will purchase all that popcorn, but when you're going in to purchase, you know, the popcorn or the cookies In Kroger, they just say, hey.
Chris Picciurro:Just Venmo me. Well, there's always that one person that gets a bunch of Venmo money. They don't keep the money. They actually turn it in to pay for the popcorn. The point is they might get a 10.99 k, and it might look like they're in some type of business because now they are receiving more than the limit allowed before you get issued a 10.99 k.
Chris Picciurro:So in 2023, there's been a lot of activity with this rule. In 2023, unless you had $20,000 of gross payments come in or 200 transactions, you would not receive a 10.99 k, let's just say, from from Venmo. This goes for all third party payment organizations, which is gonna be Venmo, Etsy, PayPal. But let's just say Venmo. Okay?
Chris Picciurro:That threshold for 2024 gets reduced down to $5,000, and it doesn't matter how many transactions. So 20,000 is a lot, but, you know, a whole pack of cub scouts could easily generate more than $5,000 worth of popcorn sales. And let's say, John, you're that person that's collecting all the money and sending it off, you're gonna get a 10.99 k from those popcorn sales.
John Tripolsky:And now so many scenarios really would happen. I mean, that could be, like Oh. Office Christmas parties, bridal showers, things, anything.
Chris Picciurro:Think about this, John. Think about it like and this is for the year. Think about a situation where you yeah. Concert tickets. That's why I always call it a Taylor's let's say I I a buddy of mine and I was very fortunate.
Chris Picciurro:There's 8 of us who went on a pickleball trip. And one of the guys rented the house, created everything, and I think it was like $1100 a guy. Right? There's 8 of us. We all Venmo'd him.
Chris Picciurro:11. He didn't make any money on this. So last year he probably was okay. If we did that in 20, or or I'm sorry. For 23.
Chris Picciurro:That happened in 24. He's gonna get a 10.99 k from Venmo. Mhmm. Oh, and he's a good friend of mine too.
John Tripolsky:Then he's gonna call you for advice and ask you what to do. So
Chris Picciurro:but he's he's really he's actually a CPA also. So he'll he'll know what to do. But, but the thing is and that's actually a great topic, John, for some content on our YouTube channel. What to do when you get a 10.99 k and you're not in business. Right?
Chris Picciurro:So there are specific reporting guidelines, that you don't wanna ignore it. You have to rep you need to report this. So you're gonna get a letter from IRS most likely. It's called a CP 2,000. So if they're if you're not in, so, yeah, actually, you just motivated me.
Chris Picciurro:I'm gonna add that to to some of our content to what. But if you get a 10.99 k, and you're not in any type of business, it was a kind of an innocent situation where you're, yeah, collecting money for concert tickets, travel, bridal party, then definitely talk to your tax professional and do not even know where that. So be aware of that rule, and don't be alarmed. The rule changed. So that's why we're doing the podcast, John.
Chris Picciurro:That's why people wanna listen to this podcast.
John Tripolsky:Probably be a lot of people getting those, you know, when the, your favorite football team, the Detroit Lions, go to the Super Bowl.
Chris Picciurro:Oh, boy. Well, think
John Tripolsky:about some tickets.
Chris Picciurro:Well, of course, we don't advocate any type of, any any type of illegal activities, but think about squares for football. Mhmm. Fan or fantasy football. Now a lot of times there's there's apps that can help you out with that. But, anyway, so 1099 k rules change significantly.
Chris Picciurro:A lot of people in the accounting community, and I believe the IRS, would like to see the $20,000 limit be in place, because it just report creates a bunch more reporting. Now that limit was $600 at one point, by the way. So well, so what else has changed? Well, now this one kinda touches on people that own a business or people that are self employed. Bonus depreciation percentage got reduced from 80% to 60%.
Chris Picciurro:It's scheduled to phase out to 40% this year, 20% and 26, and then it goes bye bye. Now we do anticipate there might be some movement with this rule with the new administration, but bonus depreciation is the backbone for cost segregation studies. It's the backbone for doing being able to deduct fixed asset purchases for business owners. So right now, bonus appreciation is at 60% for 2024, Assets placed in the service in 24, there was 80% in 2023. So definitely go back.
Chris Picciurro:Let's enter that cost segregation study, content. Check out the YouTube channel. I know I sound like a walking commercial. We do have a lot many lessons on bonus depreciation, but be aware that that went down to 60% here. That could change, but it went down to 60%.
Chris Picciurro:So another change, kinda on the opposite spectrum of the, the bet, 37% marginal, the tax bracket is the earned income tax credit. So the earned income tax credit is a credit out there for people that are at a lower taxable income, situation. The vast majority of them have dependents, but not all of them. And ultimately, it's a non refund or it's a refundable credit, meaning even if they don't have the tax, they can get that credit to really help them with their living expenses. And the maximum went from $74130.23 all the way up to 7830, for 2024.
Chris Picciurro:So that's a pretty big jump as well. When earned income credit kinda works like a bell curve, you start qualifying at certain amount of income, it peaks out, and then it phases down. So this is first this is this earned income tax credit is for does designed for households in that lower taxable income situation, that typically have dependents, but you don't have to have dependents. Yep.
John Tripolsky:So it's and And I know that was one of the acronyms that we've mentioned around a couple of times, the IETC.
Chris Picciurro:Yeah. Yeah. Well, yeah, there's all these acronyms, John, when you, you know, you you feel,
John Tripolsky:The EITC. I messed that one up.
Chris Picciurro:Yeah. That's EIC. Some people call it earned income credit EIC. Some people call it EITC. Then we had the ERC.
Chris Picciurro:You remember the, the employee retention credit or the ERTC, the employee retention tax credit. But this is the this has been around for a long time. It's the earned income credit or earned income tax credit. We talk a lot about estate and gift taxes, in the teaching tax flow community. We know that with the Tax Cuts and Jobs Act scheduled to go away, the estate and income tax the estate tax exclusion is going to get significantly reduced.
Chris Picciurro:So anyone who has a significant amount of assets, you definitely wanna be talking to your estate planning attorneys in 2024, in my opinion. The annual gift tax exclusion increased from 17,000 to 18,000. That means, John, when you and your wife are feeling benevolent, you could each give myself, my wife, and all of our kids $18,000 each and pay no tax, we pay no tax, and it's not even reportable. That's that annual gift tax exclusion. If, John, when you're feeling generous, if you say, you know what?
Chris Picciurro:I'm gonna give you and your wife and kids $20,000 each and so will so will your wife. At that point, the amount that go is above the annual gift tax exclusion does start working against your lifetime estate tax exclusion. Here, they that went from 12,900,000 to $13,600,000 in, so this is by far the largest, estate tax exclusion amount that I've ever seen. There was one gap year. I think it was 2020 10.
Chris Picciurro:I believe it's the year that George Steinbrenner passed away where we had a gap, where we had no estate tax. So this is the estate taxes up to $13,600,000. If you give away more than your annual gift tax exclusion, you start chipping away at that amount. So if you're in that situation where you're doing some estate planning, definitely talk to a a a the state planning attorney and your tax professional to do that proper planning because we are right now in the highest estate tax exclusion era ever.
John Tripolsky:And I feel like we touched on that just very briefly on the other side of it. We did an episode, I believe, not too long ago on step up in basis.
Chris Picciurro:Absolutely. Yeah. Yep. It it plays a role in step up in basis. We're gonna have some additional content coming down the road, that talks about, you know, that talks about estate estate planning, and and and something called DSUE, which is the deceased spousal unused exemption.
Chris Picciurro:But, yeah, absolutely. There's there's some opportunities there for people that are either that that wanna do some estate planning, and right now, they're locking in to a good situation. So that wealth transfer wealth transfer planning right now is a good time to to consider that. Yep. Now so those are the main, the main changes.
Chris Picciurro:There are were some changes with Secure 2.0 with employers, that have retirement plans that you wanna be aware of. Because you know what? Even though the holiday season's over, we're feeling benevolent, and we're gonna give you a sneak peek at something coming down the pipeline. We will have another entire episode on this down the road. Starting here, January 1, 2025 and beyond, there's a significant change to digital asset reporting.
Chris Picciurro:Now we know that about a few years ago, the IRS put on your form 10 40, which is a personal return, an innocent little question, yes, no question that says, are you involved in digital assets? Did you sell, buy, you know, trade any of these assets? And you have to say yes or no. In the reporting, it was always required if you did that. However, the IRS and the federal government really had issues figuring out how to match it up.
Chris Picciurro:Right? Because the exchanges like Coinbase or were any any of these they weren't required to issue you any type of tax forms, and they weren't required to issue any to the IRS. It was all self reporting, and it's kind of the wild west. So because of that, the the federal government said, look, we've got to clean this up. This is my opinion, of course.
Chris Picciurro:Okay? I'm paraphrasing. We've gotta clean this up, and we need to make a new form. So they made a new form called a 1099 d a, stands for digital assets, and it's very much like a 1099 b, okay, which is a 1099 issued by a brokerage. So you're gonna so John, like, let's say you and your wife have a brokerage account and you, you know, you it could be with a Robin Hunter.
Chris Picciurro:It could be with a big Fidelity or it could be with anyone. At the end of the year, they report any sales of your mutual funds to EFT securities. Well, now those same rules are gonna be in a play for digital assets. So the 1099 d a, the draft is out there on the IRS website. It's getting cleaned up and finalized, but it's gonna be required for transactions occurring on or after January 1, 2025.
Chris Picciurro:And brokers are gonna be required to file this with the IRS and provide their customers copies of this in early 2026. So a year from right now, any of your digital asset activity will now be reported to the IRS. And and that includes not just the sale of a digital asset, but the swapping of digital assets as well, because that's all going to be, reportable. So it's it's quite interesting, and I think it's gonna lead to a lot of, you know, a lot more a lot more reporting. I mean, again, you're supposed to be reporting this no matter what.
John Tripolsky:And, really, it's just the IRS kinda getting in getting in tune with things. Right? Like, they're they know what's going on. Right now, they're just making it a little bit more form specific, if we will. Right?
Chris Picciurro:Well, absolutely. I mean, they they need to, yeah, whenever there's a tax gap, right, they try to clean it up by creating a form. The 10.99 k, they felt like there's a big tax gap. Now remember, one of the laws of teaching tax law, tax agencies are your involuntary business partner. So they get to make some rules, and they get to make new forms.
Chris Picciurro:So as of, you know, as of end of last year, there is a, like I said, draft of the 1099 d a. Actually, John, if we wanna feel fat and sassy, we could even throw on the show notes if you wanna take a peek at It's very, very interesting. And, what they're asking for, but it does mirror the 1099 b. So Absolutely. Yeah.
John Tripolsky:We'll pop that in there. And then also too, if for those that are listening or watching, check out, 2025.tax. So 2025.tax. So there's no dot com at the end of that. If you're looking for a tax repair, it's actually something we created at Teaching Tax Flow.
John Tripolsky:Helps to kinda connect you with the best person. There's some packages out there, multiple levels depending on whatever your needs are. But then also too, Chris, this was well, not too long ago, we did a session on tax prep readiness that is going to be actually, I think it is now, available for on demand. So anybody can go ahead and and watch that. It's pretty short.
John Tripolsky:15 minutes or so. We kinda power through a bunch of q and a that we got from individuals, from the community, from the private Facebook group, etcetera. We had some fun doing that. So I'll put that link in the show notes as well, and, yeah, they're they're free to watch, free to chime into, and, you know, fill out that quick form and check out that 2025 dot tax. But as always, we'll see everybody back here next week.
John Tripolsky:Same time roughly, completely different topic on the Teaching Taxable podcast.
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