It’s 2023 and a new year means it’s tax filing season. As taxpayers, we need to take some key steps as we prepare to file our 2022 federal tax returns. While some useful tax tools are no longer available, many favorable ones still exist. For example, you may still qualify for temporarily expanded eligibility for the premium tax credit on your 2022 tax return. As with any tax issue, THE TAX EXPERTS can help if you have any questions or concerns.
The following are some new important items for all taxpayers to consider before filing in 2023.
*No Above-the-Line Charitable Deductions in 2023
During the COVID pandemic, you could take up to a $600 charitable donation tax deduction on your return. This has changed in 2022. If you take a standard deduction, you are no longer entitled to take an above-the-line deduction for charitable donations.
*Certain Tax Credits Return to 2019 Levels
In effect, you will receive a significantly smaller refund than in previous tax years for certain credits. The IRS changes affect the following:
- Child Tax Credit (CTC)
- Earned Income Tax Credit (EITC)
- Child and Dependent Care Credit
Instead of a $3,600 CTC per dependent in 2021, you are only eligible for a $2,000 CTC in 2022.
For the EITC, if you are eligible, instead of receiving approximately $1,500 in 2021, you will only receive $500 in 2022.
Finally, instead of having a maximum credit of $8,000 as in 2021, the Child and Dependent Care Credit will only have a maximum credit of $2,100 in 2022.
*New Eligibility Rules for Claiming a Clean Vehicle Tax Credit
The Inflation Reduction Act of 2022 made changes to the Clean Vehicle Credit eligibility requirements for vehicles purchased from 2023 to 2032. You may qualify for a credit of up to $7,500 if you purchase a new, qualified plug-in EV or fuel cell electric vehicle (FCV).
You must buy the vehicle for your personal use and not resell it. You must also use it primarily in the United States. Another requirement is that your modified adjusted gross income (AGI) may not exceed:
- $300,000 for married couples filing jointly
- $225,000 for heads of households
- $150,000 for all other filers
You can learn more about this credit here.
*New Reporting Rules for Form 1099-K
Form 1099-K is issued for third-party network transactions. All income, whether received from doing part-time work, side jobs or selling goods remains taxable. You should receive this form by January 31, 2023, if you received third-party payments in 2022 for goods and services that exceeded $600.
Before 2022, Form 1099-K was issued for third-party network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. At this time, a single transaction exceeding $600 may require a third-party payment network to issue a 1099-K.
Money received as a gift or a reimbursement from a third-party platform for a personal expense is not taxable. If you are unclear about something related to Form 1099-K, a tax professional can answer your questions. You can also learn more here.
*Make Sure Your 2022 Tax Records Are Complete!
If you do not have a legitimate paper or electronic recordkeeping system (while the latter is preferable, it is not a bad idea to have both), you risk problems in the future, especially if you are audited.
Complete tax records will help you avoid issues and errors that result in the delay of the IRS processing your tax return. THE TAX EXPERTS can help ensure that your records are complete.
You should keep your important tax information in one central location. Important forms to retain include:
- W-2s from employers,
- Form 1099s from banks or other payers,
- Form 1099-INT for interest payments,
- Form 1099-K from third-party payment networks,
- Form 1099-NEC for nonemployee compensation,
- Form 1099-MISC for miscellaneous income, and
- Records documenting any digital asset transactions.
*Talk to a Qualified Tax Professional!
If you live in New York or the Tri-State area and have any questions about any tax-related issue, call 212-490-0704 today for a FREE consultation. You can also learn more online here – THE TAX EXPERTS. We can help you maximize your tax savings for 2022, as well as help you plan now to save on your 2023 tax bill!
