What To Expect This Tax Season That Changed From Last Year
This Tax Season to Last Tax Season
Everyone can agree the last two tax seasons (2020 and 2021) have been an unprecedented time for taxpayers. During this time, many pieces of tax legislation were enacted to help support taxpayers during the COVID-19 pandemic. While 2022 has been a return to “normalcy,” there are several tax changes taxpayers should be aware of before filing their 2022 tax return.
Tax Credit and Deduction Changes
Unlike the last two tax seasons, 2022 will be different in the fact that taxpayers will not have to report receiving any Economic Impact Payments and/or Advanced Child Tax Payments as both of those credits, Recovery Rebate Credit and Advanced Child Tax Credit, expired at the end of 2021 and were not renewed for 2022. The Child Tax Credit (CTC) will return to its pre-pandemic amount of $2,000 per child aged 16 or younger. This is a decrease from the previous year when it was $3,000 per child aged 6-17 and $3,600 for children 5 years and younger. Also, the “above-the-line” charitable deduction of up to $600 for married-filing joint filers, $300 for single filers, available to taxpayers taking the standard deduction during the 2020 and 2021 tax years, has expired and will not be available in 2022.
Inflation Reduction Act
Enacted into law on August 16, 2022, the Inflation Reduction Act revises some key clean energy credit requirements for taxpayers. In order to claim the $7,500 Plug-In Electric Vehicle Credit, a vehicle bought on or after August 16th, must go through final assembly in North America. If purchased before August 16th, the final assembly requirement does not apply. The Residential Clean Energy Credit was revised in the IRA to now include a 30% credit of the total cost to install qualified solar and wind powered equipment. The Energy Efficient Home Improvement Credit has been extended through 2022. Taxpayers can claim a maximum lifetime credit of $500 in 2022 before it becomes an annual credit of $1,200 in 2023.
On December 23, 2022, the IRS announced the new 1099-K reporting requirement for payments received over $600 for goods and services, had been postponed until tax year 2023. The old reporting requirement of $20,000 received for goods and services, will remain in place for tax year 2022. Even with the delay of the lower reporting requirement, some taxpayers may still receive a 1099-K from various third-party payment providers such as PayPal, Venmo, and Zelle. Payments received from friends and family for various other purposes should not be reported as income. Please consult with us if you do receive a 1099-K in 2022. You can reach our team at (724) 934-4880 and we will be happy to assist you.
This article was written and contributed by Aaron Sawyer at Holsinger P.C. , under direction of tax managers, Jessica Moslander and Ryan Zeleznik. This information is not meant as tax advice but merely an informative piece. We are happy to consult with you and provide detailed guidance given your unique situation to make the best possible tax position for the upcoming filing. Please feel free to contact us with your questions and to schedule a consultation.