Without further ado, as the tax season for 2025 nears, the Internal Revenue Service urges taxpayers to take proactive measures to have a successful experience when filing their 2024 federal income tax returns. Ongoing efforts by the IRS include improving offerings as part of its always-broadening suite of digital tools and resources to assist taxpayers with preparation for this time of year. Here’s what you need to be ready for.
Read more: CTC limit changes for 2025 forever – These will be the new Child Tax Credit margins as of January 1.
Utilize IRS online tools for better preparedness
The IRS encourages taxpayers to sign up for an IRS Online Account, which provides a centralized platform for managing tax-related information. With this account, individuals can:
- Access key details from their most recent tax return, such as adjusted gross income.
- Request an Identity Protection PIN (IP PIN) to safeguard their tax records.
- View and manage account transcripts, including wage and income records.
- Sign important tax forms like powers of attorney and tax information authorizations.
- Edit language preferences and access alternative media formats.
- View over 200 IRS electronic notices and receive updates.
- Check balances, make payments, or set up payment plans.
The importance of an IP PIN
An IRS employee would say that an IP PIN refers to a 6-digit number put in place to ensure the safety of tax filing using Social Security numbers from the fraudulent activity of other individuals. For the year 2025 filing, among new IRS provisions, forms like 1040, 1040-NR, and 1040-SS shall be filed without dependency allowances claimed on another return as long as such primary taxpayer provides a legitimate, valid IP PIN. This change will further minimize the processing time for refunds to these taxpayers.
Subscription to the IP PIN is so easy through the IRS account online. If this process is not possible, they can apply other ways, such as authentication personally in a Taxpayer Assistance Center.
Prepare for reporting and documentation requirements
Estimated tax payments
Taxpayers with non-wage income, such as earnings from self-employment, digital assets, or annuities, should ensure they make estimated tax payments. The Tax Withholding Estimator on IRS.gov is a helpful tool to avoid surprises when filing returns. The deadline for the last quarterly payment for 2024 is January 15, 2025.
Form 1099-K changes
The concerned individuals who have received more than $5,000 as payment for goods or services rendered through any online platforms or applications will receive Form 1099-K for the year 2025 in January. It is important to understand how earning through such means will be taxable and having income from even part-time work or selling will have to be reported even if a 1099-k form is not issued. Keeping accurate records makes filing taxes much simpler and minimizes mistakes.
Digital assets reporting
Taxpayers who engage in transactions involving digital assets will be required to report all such income for the 2024 federal tax return. The term “digital asset” encompasses cryptocurrencies, digital stable currency, and identifiable tokens such as NFT. Taxpayers must keep detailed records of their transactions, including purchase details, fair market value, and disposition.
Filers will answer the most important question for tax purposes: whether they transacted any digital assets during the taxable year. Complete records will make accurate reporting possible, and IRS resources will guide taxpayers through the capital gain or loss calculations and income reporting here.
Simplify filing with additional tools and tips
Faster refunds with direct deposit
Filing electronically and opting for direct deposit remains the fastest and safest method to receive tax refunds. Those without a bank account can explore programs like the Veterans Benefits Banking Program or use tools to find FDIC-insured banks or credit unions. Refunds can also be deposited onto prepaid debit cards or mobile payment apps.
Read more: IRS Schedule K-1 Form in 2024: what is it, instructions, how to fill it out and where to apply.
Free filing options
The IRS provides several free filing options, such as IRS Free File and Direct File, for eligible taxpayers. Additionally, the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer free preparation and e-filing services for qualifying individuals, including older adults and military personnel.
Take-home note
It is mandatory for taxpayers who also hold any income other than wages, e.g., self-employment earnings, assets in the digital form, or annuity payments, to be making estimated tax payments. The IRS Tax Withholding Estimator is a tool that may help avoid surprises when filing returns. The late date for the final quarterly payment of 2024 will be January 15, 2025.
