Child Tax Credit

The maximum Child Tax Credit for 2024 is $2,000 per child who qualifies, with no adjustments for inflation. The amount that may be refunded for the Child Tax Credit is adjusted for inflation and increases from $1,600 to $1,700 in 2024.

Phased-In Approach for 2024

To further ease the transition and address operational concerns, the IRS is introducing a phased-in approach. In 2024, the reporting threshold will be increased to $5,000. This gives the agency time to review and improve its processes, taking into account feedback and concerns raised by taxpayers and other stakeholders.

Who Receives Form 1099-K

Form 1099-K is relevant for individuals and businesses using payment apps or online marketplaces to receive payments for selling goods or providing services. This includes everyone from side hustlers and small businesses to casual sellers who may have sold personal items at a loss.

Navigating Form 1099-K

For those who receive a Form 1099-K, the IRS provides resources on its Understanding Your Form 1099-K webpage. Taxpayers should review the form, ensure the accuracy of the reported amount, and identify any deductible expenses associated with the payment that can be claimed when filing taxes.

Reporting Personal Item Sales

Selling personal items can create complexity in tax reporting, even when items are sold at a loss.

• If personal items were sold at a gain, taxpayers must report the gain as income on both Form 8949 and Schedule D (Form 1040).

• If your client sold personal items for less than they originally paid, you should report the loss on Schedule 1 (Form 1040)

Earned Income Tax Credit

The 2024 Maximum Earned Income Tax Credit (EITC) for single and joint filers is $632 (no children) (SEE Table). The maximum credit is $4,213 for one child, $6,960 for two children, and $7,830 for three or more children.

What Not to Report

It’s crucial to note that reporting is not required for personal transactions, such as gifts, ride-sharing expenses, or shared household bills. These transactions are not taxable and should not be reported on Form 1099-K.

Navigating the Changes

The IRS’s decision to delay the 2023 Form 1099-K reporting threshold and implement a phased-in approach for 2024 reflects a commitment to addressing taxpayer concerns and ensuring a smoother transition. Tax preparers have the opportunity to help their clients stay informed about these changes, review their Form 1099-K carefully, and utilize available IRS resources to navigate the complexities of tax reporting. As the IRS continues to refine its processes and provide updates, taxpayers and preparers alike can expect clearer guidelines for compliance with the evolving tax requirements.

Qualified Business Income Deduction

Within the Tax Cuts and Jobs Act, there is an inclusion of a 20% deduction in 2024 for pass-through businesses with $191,950 of qualified business income for single taxpayers and $383,900 for married taxpayers filing jointly (SEE Table 6).