2022 TAX POTPOURRI
For Individuals
Child Tax Credits will be offered at $2,000 per child under age 17 (both the amount and age have been reduced from 2021 levels), and the credit is refundable, but for dependents 17 and older they still qualify for the reduced credit at $500 which, however, is non-refundable. Beware of these changes!
Virtual currency 1099-K reporting will remain at the $20,000 or 200 transactions thresholds, despite Congress’ efforts to drop the threshold to $600. For information about how to report cryptocurrency visit https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets
IRA contributions to charity remain one of the best ways to reduce your income – a better outcome than an increase in itemized deductions. Be sure to make the contribution via a trustee-to-trustee transfer.
Congress also extended the moratorium on student loan again (but in 2024 loan payments can be treated as retirement contributions where there is an employer match program—interesting idea!)
Like last year, let me remind you of the work-around for the state and local tax limitations, California has allows an optional tax equal to 9.3% of the net income of the entity like an S-Corp that is credited on the California personal return: https://www.ftb.ca.gov/file/business/credits/pass-through-entity-elective-tax/index.html
Last year, Congress passed a follow-up to the 2019 Consolidated Appropriations Act, affectionately, SECURE 2.0, in its attempt to address benefits and retirement, including increased catch-up contributions.
o Required Minimum Distributions (RMDs) for 2022 begin at 72, but if you turn 73 in 2023, there is no requirement till 2023.
o RMD penalties are now reduced from 50% of what should have been withdrawn to 25%, and even to 10% if the mistake is corrected within two years.
For Small Business Owners
More on what SECURE 2.0 could mean to you or your business:
o Unless you are a new business, if you began your retirement plan in 2023 or later, starting in 2025, employees will be automatically enrolled in the program unless they opt out, and contribution percentages must automatically increase. Will there be fewer of these plans in 2025?
o However, small businesses who start new plans can enjoy a credit up to 50% of setup costs up to $5,000, in addition to a credit for $1,000 per employee. Will there be more of these plans in 2023?
o There’s actually much more to say here, but space will not allow, so call to discuss your situation.
PPP Loan forgiveness may still be part of your 2022 return if you got the loan in 2022. Let me know.
The standard business mileage rate was 58.5 cents per mile from 01/012022 to 06/30/2022 and 62.5 cents per mile from 07/01/22 to 12/31/22, but goes to 65.5 cents per mile for the 2023 tax year. Again, drive, but be sure to keep a contemporaneous log!
If you record a net operating loss (NOL) for your business, know that the IRS will expects the burden of record-keeping to rest on the business owner, so keep track or the IRS may disallow your past losses!
Cost segregation studies may interest real estate rental owners as they break down each component of a building into smaller parts that can be depreciated more quickly. Call me if you want to understand more.
For Everyone
Please provide a schedule of any quarterly Estimated Payments you made and payments made with any extension; remind me also if you have had automatic withdrawals of Estimated Payments. Unless you tell me, I have no way of knowing, but the IRS does know!
You may have heard Congress authorized more IRS agents, but that was called back, so will that mean more robo-letters or long waits on the phone? Is this good or bad? You decide.