IRS unveils new income tax brackets and deductions for 2025
The IRS has announced key tax changes for 2025 due to inflation, including adjustments to income tax brackets, deductions, and capital gains.
Straight Arrow News
The income-tax season is underway.
Individuals are expected to file more than 160 million federal returns for tax year 2024. Most will come in by the regular April 15 deadline, with automatic extensions to Oct. 15 available to people who submit a Form 4868 to the IRS by April 15.
The IRS said this filing season will be reflected in service upgrades and modernization efforts, along with new filing options and other tools, thanks to a $79 billion funding increase from Congress over a 10-year period. The improvements include more access to tax-account information from text and voice virtual assistants, more access to dozens of tax forms through cell phones and tablets and expanded scam alerts.
However, the Taxpayer Advocate Service, a watchdog group within the IRS, also warns of various problems that might cause confusion, delay refunds and trigger other challenges. In a recent report to Congress, the service cited several key problems facing the IRS, including these of higher relevance to individual taxpayers:
Deficiencies in how IRS processes tax returns
While the IRS usually completes this task quickly, problems still crop up including slow processing of paper returns, rejections of some electronically filed returns, difficulty in correcting errors after filing and a slow pace for processing amended returns, according to the Taxpayer Advocate Service.
Also, taxpayers might have trouble obtaining information from their IRS online accounts (if they have one) and sometimes receive confusing notices and letters. The IRS did hire more than 10,000 additional workers to process returns in recent years but still needs to do more, such as upgrading antiquated technology, the watchdog group said.
The IRS has said it has extended hours and services at Taxpayer Assistance Centers, an improvement the watchdog service supports. These offices allow in-person meetings.
Tax-related identity thefts and other scams
Scams continue to be a problem and a worsening one, with “no immediate resolution in sight,” said the Taxpayer Advocate Service. Criminals are getting more sophisticated, and the IRS often is slow to resolve ID-theft cases, the watchdog group complained, with an average time to resolve some cases lengthening to 22 months.
The IRS recognizes this issue as a top priority but faces new challenges from more sophisticated ruses, including fake phone voice recordings facilitated by artificial intelligence. Older taxpayers are especially susceptible, as they tend to be more trusting and often have more money at risk. The IRS has a confusing scam-reporting process, the watchdog group added.
Tax scams involve various ruses ranging from demands to pay supposed back taxes to applying for supposed unclaimed credits, disaster-relief benefits or something else. Scammers often contact potential victims unsolicited, over the phone.
The IRS lists common scams on its website. Crooks also might try to file a return using someone else’s stolen personal information to qualify for that person’s refund.
One way to lessen the risks? File your return as soon as possible.
Encouraging taxpayers to improve their tax literacy
The Taxpayer Advocate Service also cited poor public awareness of tax and other financial issues. A lack of tax knowledge can result in mistakes and lead individuals to claim inappropriate deductions and credits while ignoring other benefits for which they might qualify. The Taxpayer Advocate Service cited a poor public understanding of even basic concepts such as how tax brackets work and the difference between credits and deductions.
While tackling low financial literacy isn’t solely the responsibility of the IRS, the watchdog service encouraged the agency to do more to improve it. With the tax code numbering more than 4 million words, that’s no small task.
New tax-filing programs, amenities ‘Just the beginning’ for IRS
Among newer features, the IRS has expanded the availability of its free Direct File service to individuals in 25 states. Taxpayers through this program can file returns straight on irs.gov. Direct File works on mobile phones, laptops, tablets or desktop computers and guides users through a series of questions to help them prepare their federal returns, step-by-step.
That’s in addition to IRS Free File, which utilizes filing software from various partner companies but is available only through irs.gov. Eight companies are providing guided preparation help for taxpayers with 2024 adjusted gross incomes of $84,000 or less.
“This has been a historic period of improvement for the IRS, and people will see additional tools and features to help them with filing their taxes this tax season,” said IRS Commissioner Danny Werfel, in an early January statement prior to his Jan. 21 resignation announcement. “These taxpayer-focused improvements we’ve done so far are important, but they are just the beginning of what the IRS needs to do.”
Other free options for filing tax returns, available to most taxpayers, include the VITA or Volunteer Income Tax Assistance/Tax Counseling for the Elderly program and AARP Tax-Aide.
The IRS issued statement on its website detailing more enhancements for the new filing season.
Reach the writer at russ.wiles@arizonarepublic.com.
