Here's what's new and some key items taxpayers should consider before filing this year.
Reporting Rules Changed for Form 1099-K. Taxpayers should have received Form 1099-K, in support of payment card and third-party network transactions, by January 31, 2023, if you received third-party payments in 2022 for goods and services that exceeded $600.
There's no change to the taxability of income. All income, including part-time work, side jobs, or the sale of goods and services is still taxable. Taxpayers must report all income on their tax return unless it's excluded by law, whether they receive a Form 1099-K, a Form 1099-NEC, Nonemployee Compensation, W-2, or any other information return.
As of 2022 a single transaction exceeding $600 would require a third-party platform to issue a 1099-K to the receipt. Money received through third-party payment networks from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.
It is important, particularly for "early filers" who typically file a tax return during the month of January or early February to ensure they have all their key income documents before submitting a tax return. Extra caution can save people additional time and effort in avoiding having to make additional payments along with having to file an amended tax return if they have untaxed income that isn't reflected on the tax return that they initially file.
Certain Tax Credits Return to 2019 Levels. Affected taxpayers will receive a significantly smaller refund compared with the previous tax year. These changes include amounts for the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Credit.
- Those who got $3,600 per dependent in 2021 for the CTC will, if eligible, get $2,000 for the 2022 tax year.
- For the EITC, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022.
- The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
No Above-the-Line Charitable Deductions. In 2022 those who take a standard deduction may not take an above-the-line deduction for charitable donations.
More People May be Eligible for the Premium Tax Credit. For 2022, taxpayers may still qualify for temporarily expanded eligibility for the premium tax credit.
Eligibility Rules Changed to Claim a Tax Credit for Clean Vehicles. Please reach out to your tax preparer to review these changes to ensure your vehicle qualifies for a clean vehicle credit.
How to Avoid Refund Delays
Numerous factors can affect the timing of a refund from the IRS. While the IRS issues most refunds within 21 days, they caution taxpayers not to rely on receiving a 2022 federal tax refund by a certain date, especially when making major purchases or paying bills. Some returns require additional review and may take longer to process if IRS systems detect a possible error, or the return is missing information, or there is suspected identity theft or fraud.
In addition, the IRS cannot issue refunds for people claiming the EITC or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund—not just the portion associated with EITC or ACTC.
Last Quarterly Payment for 2022 Was Due January 17, 2023
Taxpayers may need to consider estimated or additional tax payments due to non-wage income from unemployment, self-employment, annuity income, or even digital assets. Please contact your tax preparer for assistance in determining if you have a need to consider an additional tax payment to avoid an unexpected tax bill when you file.
Gather 2022 Tax Documents
Each taxpayer should now be compiling their important tax information in one place. This includes year-end income documents like Forms W-2 from employers, Forms 1099 from banks or other payers, Form 1099-K from third-party payment networks, Form 1099-NEC for non-employee compensation, Form 1099-MISC for miscellaneous income, or Form 1099-INT if you were paid interest, as well as records documenting all digital asset transactions.
Ensuring your tax records are complete before filing helps tax preparers avoid errors or omissions that lead to processing delays. When you have all your documentation, you are then in the best position to file an accurate return and avoid processing or refund delays or IRS letters.
At Alexander Fitzgerald & Associates LLC, we’re always game to help you think things through to suit your specific tax situation. Please contact us at 470.207.8717 for a consultation.