By Mary Gillum, Legal Aid Society
With the 2024 tax filing season now underway, Tennessee residents who don’t pay much attention to taxes throughout the year may soon find themselves cramming to catch up. If that describes you, here are a few essentials to get you started.
When do I have to file by?
This year, the 2023 federal individual income tax filing deadline is Monday, April 15. Taxpayers use IRS Form 1040 to file individual tax returns. Taxpayers also have the option of filing an extension to extend their deadline to Tuesday, October 15. IRS Form 4868 is used to file for an extension, but it must be filed by April 15.
Residents of Davidson, Dickson, Montgomery and Sumner counties will have slightly longer this year — until Monday, June 17 — to file returns and make tax payments without penalty. That’s because those counties were declared disaster areas by FEMA in response to the recent tornadoes. If you live in those counties, you don’t need to have been personally affected by the tornadoes to take advantage of the later filing deadline.
IRS updates for 2024
Low- and middle-income earners in Tennessee who earn less than $1,500 yearly in wages, Social Security, unemployment or interest and usually claim a standard deduction may qualify for the IRS’s new Direct File pilot program, which it is rolling out during February and March across several states, in both English and Spanish versions. According to the IRS, several hundred thousand taxpayers will be eligible for the program this year. Unlike filing through an online tax preparation service like TurboTax, there will be no charge to use the IRS’s filing program. Also, Direct File provides free electronic filing to speed up your tax return processing and potential refund!
This year, the IRS is resuming the mailing of collection notices for overdue tax bills. Anyone who owes taxes from 2020 or 2021 may not have received a reminder notice until now, and because some people may not be aware that they owe taxes, the IRS is waiving any penalties for failure to pay on the 2020 and 2021 accounts. Any taxpayers who have paid penalties will get those penalties refunded or credited toward another outstanding tax liability. However, the clock for late penalties does start now for those who owe taxes for those years.
Don’t overlook the Earned Income Tax Credit
Every year, millions of taxpayers claim the Earned Income Tax Credit (EITC) on their returns, and for decades it’s helped reduce poverty across the country, particularly for families with children. It’s intended to boost the incomes of low- and middle-income wage earners through a refund that varies based on income.
Unlike other credits, the EITC is fully refundable — meaning that you don’t have to have paid taxes to qualify. Earned income can be from gig, temporary or freelance jobs like driving a car, selling goods online, cleaning houses, babysitting or operating your own business. Among the types of income that don’t qualify for the EITC are interest and dividends, Social Security, unemployment benefits, alimony or child support.
Parents making around minimum wage get the highest amount refunded — as much as $7,430 for a taxpayer with three or more qualifying children. For a family bringing in around $15,000 a year through a minimum-wage job, an influx of money like that can make a huge difference.
Taking the Child Tax Credit
Another popular credit — completely separate from the EITC — is the Child Tax Credit. Some taxpayers may even find that they qualify for both. Unlike the EITC (which is only open to single taxpayers, head-of-household taxpayers, separated taxpayers living apart the last six months and married couples filing jointly), the Child Tax Credit can also be taken by eligible married couples filing separately, regardless of whether they were living separate the last six months of the year.
The Child Tax Credit is $2,000 per qualifying child. It can reduce your tax, allowing for a smaller amount owed or larger refund. However, only taxpayers who earn more than $2,500 can potentially get a cash refund of the Child Tax Credit. The amount of the refundable Child Tax Credit is up to $1,600 per qualifying child. It is calculated by multiplying 15% of earned income above $2,500, up to $1,600 per qualifying child. Among the requirements to qualify: Children have to be age 16 or below at the end of 2023, be legally related to you and be properly claimed as dependents on your tax return.
An added perk for retirement savers
Adult taxpayers starting to save for retirement should be aware of one lesser-known credit, the Retirement Savings Contributions Credit (also known as the Saver’s Credit). It helps offset part of the first $2,000 voluntarily contributed by workers during the past year to IRAs, 401(k) plans and similar workplace retirement programs. If you haven’t contributed to your IRA yet this year or don’t have one yet, you have until April 15 to still count it for 2023. The maximum amount of this credit is $1,000 per taxpayer, or $2,000 for married couples, though it can be affected by other deductions and credits.
Getting help from Legal Aid Society
If you have questions related to your tax return, you can call Legal Aid Society’s statewide Tennessee Taxpayer Project hotline toll-free at 866-481-3669 to receive free advice. While we don’t assist with preparing tax returns, we are able to offer free legal assistance with tax-related matters for qualifying low-income Middle Tennessee residents. Call us or visit www.las.org to learn more.