Tax season can be overwhelming for many individuals, especially if you're not a Certified Public Accountant. To help make sense of it all, we spoke with Lisa Greene-Lewis, a CPA at TurboTax.
“First, I would gather all your documents in one place," she advised.
Greene-Lewis emphasizes that deductions are critical. It might seem obvious, but whether you pay for childcare, contribute to a health savings account, or own an electric vehicle, there are numerous tax breaks available. Being aware of these deductions is your best bet for reducing your taxable income.
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“If you went to college and took a class, you may be eligible for the lifetime learning credit, and that could be worth up to $2,000 just for one class so you want to have those receipts gathered together," Greene-Lewis said.
Another essential factor to consider is your state of residence, especially with the rise in remote work. If you live in a different state from where your employer is based, there could be tax implications due to varying state definitions of residency, which can affect your state income tax. Additionally, changes in this year’s tax code are important to keep in mind, particularly for online sellers.
“You know, there are so many people that are working side gigs. ... Anything directly related to your business, you want to have those receipts. It could be advertising, car expenses, your home office," Greene-Lewis noted.
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In line with this, the IRS changed the reporting thresholds for the 1099-K form for online sellers using services like PayPal or Venmo. Previously, you only had to report amounts exceeding $20,000. This year, the threshold has dropped to $5,000, and in 2024, it will be $2,500, before further decreasing to $600 in 2026.
Keeping track of these transactions is crucial to avoid potential penalties from the IRS.
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