FAQ
1. What are the filing status available as per IRS?
2. What is the amount of Exemption available for the year 2023?
The personal exemption amount was set to zero (0) from 2018 through 2025, under the Tax Cuts and Jobs Act. There is no personal and dependent exemptions in 2023.
3. What is the standard deduction available for 2023?
Most taxpayers have a choice of either taking a standard deduction or itemizing
their deductions. If you have a choice, you can use the method that gives you the
lower tax. You benefit from the standard deduction if your standard deduction is
more than the total of your allowable itemized deductions.
Persons not eligible for the standard deduction:
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A married individual filing as married filing separately, whose spouse itemizes deductions ;
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An individual who was a nonresident alien or dual status alien during any part of the year (note that residents of India may be able to claim the standard deduction if they meet certain criteria);
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An individual who files a return for a period of less than 12 months due to a change in his or her annual accounting period; or
- An estate or trust, common trust fund, or partnership.
Married couples get $27,700, plus $1,500 for each spouse age 65 or older. Singles can claim a $13,850 standard deduction. Head-of-household filers get $20,800 for their standard deduction, plus an additional $1,850 once they reach age 65. Blind people can tack on an extra $1,500 to their standard deduction ($1,400 for 2022). For 2023, as in 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
4. What is the Earned Income Credit ( EIC) available for 2023?
The maximum amount of credit you can get for 2022 is:
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There several inflation-based adjustments that modify the EITC for 2023. The maximum credit amount is increased from $3,733 to $3,995 for workers with one child, from $$6,164 to $6,604 for workers with two children, and from $6,935 to $7,430 for workers with three or more children. The earned income required to claim the maximum EITC is also adjusted annually for inflation. For 2023, it should be less than $17,640 ($24,210 if married and filing a joint return) if you have no child, $46,560 ($53,120 if married and filing a joint return) if you have one child, $52,918 ($59,478 if married and filing a joint return) if you have two or more children, and $56,838 ($63,698 if married and filing a joint return)if you have $56,838 ($63,698 if 3 or more qualifying children.
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Qualifying Child:
• Your son, daughter, stepchild, adopted child or a descendant.
• Your foster child, placed with you by an authorized agency or court order.
• Your brother, sister, stepbrother, stepsister or a descendant of one of these.
• Age 18 or younger as of the end of the year (unless the child is a full-time student, in which case the student has to be 23 or younger). Exception: A person who is permanently and totally disabled at any time during the year qualifies, no matter how old.
• A resident with you in the United States for more than half of the year
Investment income amount: The maximum amount of investment income you can have and
still get the credit is $11,000 for 2023.
5. What is the Alternative Minimum Tax (AMT) exemption amount for the year 2023?
Until the AMT exemption enacted by the Tax Cuts and Jobs Act expires in 2025, the AMT will continue to affect mostly households with incomes over $500,000. For 2023, the AMT exemptions are $81,300 for single filers and $126,500 for married taxpayers filing jointly. The phase-out thresholds are $1,156,300 for married taxpayers filing a joint return and $578,150 for all other taxpayers. (Once your income for the AMT hits the phase-out threshold, your AMT exemption begins to phase out at 25 cents for every dollar over the threshold.)
6. What is the Standard Mileage rate for the year 2023?
• 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
• 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
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7. What is the Foreign Earned Income Exclusion available for the year 2023?
U.S. taxpayers working abroad have a larger foreign earned income exclusion in 2022. It jumped from $112,000 for 2022 to $120,000 for 2023. In addition, the amount of qualified housing expenses eligible for the foreign housing exclusion or housing deduction is also limited. The limitation on housing expenses is generally 30% of the maximum foreign earned income exclusion. For 2023, the housing amount limitation is $36,000. However, the limit will vary depending upon the location of your foreign tax home and the number of qualifying days in the tax year.
8. What are the Education Expenses Credit available for the year 2023?
Following are the Education Expenses Credit available for the year 2023:
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Employer Provided Educational Assistance: In 2023, as an employee, you can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer. If your employer pays more than $5,250 for educational benefits for you during the year, you must generally pay tax on the amount over $5,250. Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income.
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American Opportunity Tax Credit: For 2023, You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you. The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student. But, if the credit pays your tax down to zero, you can have 40 percent of the remaining amount of the credit (up to $1,000) refunded to you
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To claim the full credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly).
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You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).
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You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).
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Lifetime Learning Credit (LLC): The amount of the credit is 20 percent of the first $10,000 of qualified education expenses or a maximum of $2,000 per return. The LLC is not refundable. So, you can use the credit to pay any tax you owe but you won’t receive any of the credit back as a refund.
- To claim the full credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly).
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You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).
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You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers)
9. What is the maximum amount can be claimed as Student Loan Interest?
In 2023 you can deduct up to $2,500 in interest paid on a student loan (also known as an education loan) used for higher education, as long as your modified adjusted gross income (MAGI) is less than $80,000 (single) or $160,000 (married filing jointly). The deduction is phased out at higher income levels. No deduction if MAGI is more than $85,000 ($170,000 if filing a joint return).
10. What are the Tax Rates for Long Term Capital Gains?
In 2023, the 0% rate applies for individual taxpayers with taxable income up to $44,625 on single returns ($41,675 for 2022), $59,750 for head-of-household filers ($55,800 for 2022), and $89,250 for joint returns ($83,350 for 2023).
The 20% rate for 2023 starts at $492,301 for singles ($459,751 for 2022), $523,051 for heads of household ($488,501 for 2022), and $553,851 for couples filing jointly ($517,201 for 2022)
is for filers with taxable incomes between the 0% and 20% breakpoints.
The 3.8% surtax on net investment income stays the same for 2023.
11. What are the Retirement Savings Avaialble for 2023 & 2024?
401(k), 403(b), and most 457 plans For 2024: >
The amount an individual can contribute to a 401(k), 403(b), and most 457 plans increases to $23,000, up from $22,500 in 2023. The catch-up contribution amount, for employees 50 and older who participate in these plans, remains at the 2023 level of $7,500 (Note: This means participants over 50 can contribute up to $30,500 to one of these plans.
IRAs:
For IRAs, the amount an individual can contribute increases to $7,000 (up from $6,500 in 2023). The catch-up contribution amount remains $1,000.
SIMPLE IRAs:
The amount individuals can contribute to their SIMPLE accounts increases to $16,000 (up from $15,500 in 2023). The catch-up contribution limit for SIMPLE accounts contribution amount remains $3,500.
Phase-out Ranges & Income Limits:
The traditional IRA phase-out ranges for 2024 are:
For single taxpayers covered by a workplace retirement plan, the phase-out range begins at $77,000 and ends at $87,000 (up from $73,000 and $83,000 in 2023).
For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range increases to between $123,000 and $143,000 ($116,000 and $136,000 in 2023).
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range increases to between $230,000 and $240,000 ($218,000 and $228,000).
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
The phase-out ranges for Roth IRAs are:.
For singles and heads of household, the phase-out begins at $146,000 and ends at $161,000 (up from between $138,000 and $153,000 in 2023).
For married couples filing jointly, between $230,000 and $240,000 (up from between $218,000 and $228,000 in 2023).
For married couples filing separately between $0 and $10,000.
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) increases to:
$76,500 for married couples filing jointly, up from $73,000;
$57,375 for heads of household, up from $54,750; and
$38,250 for singles and married couples filing separately, up from $36,500.
12. What is the due date of filing 2023 Federal Tax Returns? What if, I cannot file
on time?
By April 15, 2024 you have to file Federal Tax Returns. If you cannot file on or before due date, you can request IRS for an automatic extension ( to October 15, 2024). Extension request (Form 4868) must be filed no later than the original due date (April 15, 2024).
13. Whether Automatic Extension to file the Tax Returns extends the time to pay my tax liabilities?
No, you have to pay your tax liabilities by the original due date or your return. If not, you will owe the interest on the unpaid tax and may owe penalties.
14. What are the consequences of not filing a tax return?
Not filing a federal tax return can be costly - whether you end up owing more or
missing out on a refund. The IRS may also impose a wide range of civil and criminal
sanctions on persons who fail to file returns.
Here are some things to consider:
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Failure to file penalty: If you owe
taxes, a delay in filing may result in a "failure to file" penalty, also known as
the "late filing" penalty, and interest charges. The longer you delay, the larger
these charges grow. It may result in penalty and interest charges that could increase
your tax bill by 25 percent or more.
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Losing your refund: There is no penalty
for failure to file if you are due a refund. However, you cannot obtain a refund
without filing a tax return. If you wait too long to file, you may risk losing the
refund altogether. In cases where a return is not filed, the law provides most taxpayers
with a three-year window of opportunity for claiming a refund.
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EITC: Individuals who are entitled to
the Earned Income Tax Credit must file their return to claim the credit even if
they are not otherwise required to file. The return must be filed within three years
of the due date in order to receive the credit.
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Statutes of limitation: After the expiration
of the refund statute, not only does the law prevent the issuance of a refund check,
it also prevents the application of any credits, including overpayments of estimated
or withholding taxes, to other tax years that are underpaid. On the other hand,
the statute of limitations for IRS to assess and collect any outstanding balances
does not start until a return has been filed. In other words, there is no statute
of limitations for assessing and collecting the tax if no return has been filed.
15. Do I need to report Foreign Bank and Financial Accounts (FBAR) to IRS?
If you have a financial interest in or signature authority over foreign financial accounts, then you must file an FBAR, if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
FBAR in Form TD F 90-22.1 must be filed on or before April 18, 2023.
16. Do I need to file Statement of Specified Foreign Financial Accounts in Form 8938?
If you have specified foreign financial assets and total value is exceeding $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year ( if you are filing status is single) or if the total value is exceeding $ 100,000 on the last day of the tax year or more than $150,000 at any time during the tax year ( if you are filing married filing joint), then you have to file form 8938. Form should be filed by due date of tax return.
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