The Internal Revenue Service (IRS) encourages taxpayers to take important actions this month in order to help them file their 2022 federal tax returns. While the deadline for filing taxes is still more than a year away, there are some key items for taxpayers to consider before they file next year. Let’s take a look at some of the changes and what taxpayers should know before filing next year’s taxes.
First, reporting rules have changed for Form 1099-K. Taxpayers should receive Form 1099-K, Payment Card and Third Party Network Transactions, by January 31, 2023 if they received third party payments in tax year 2022 for goods and services that exceeded $600. This form will provide valuable information on how much money was paid out by third parties on your behalf during the tax year. It is important that you keep this form in case the IRS requests it when you file your taxes.
Second, some tax credits are returning to 2019 levels. This means that affected taxpayers will likely receive a significantly smaller refund compared with the previous tax year. Changes include amounts for the Child Tax Credit (CTC), Earned Income Tax Credit (EITC) and Child and Dependent Care Credit (CDCC). It is important to be aware of these changes so you can properly adjust your withholdings or estimated payments accordingly over the course of the year in order to minimize any surprises come filing time next April.
For Example:
Those who got $3,600 per dependent in 2021 for the CTC (Child Tax Credit) will, if eligible, get $2,000 for the 2022 tax year.
For the EITC (Earned Income Credit), 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
Finally, above-the-line charitable deductions are no longer available for individuals with Adjusted Gross Income (AGI) greater than $100,000 ($200,000 if married filing jointly). If you usually deduct your charitable contributions from your AGI each year, then you may need to make other arrangements such as making donations directly from your IRA or employer sponsored retirement plan in order to maximize your deductions going forward.
Filing taxes can be daunting at times but understanding how new laws can affect future filings can help alleviate some of that stress. Paying attention to changing rules now could help save you time and money when it comes time to actually file next April 15th . For more detailed information about these changes or any other questions related to filing taxes please refer directly to IRS website or contact a certified accountant who specializes in taxation laws today!
We hope this brief overview has been helpful and wish everyone luck on their upcoming 2022 tax filings!