TLDR: The Internal Revenue Service encourages taxpayers to take simple steps before the end of the year to make filing their 2022 federal tax return easier.
With a little advance preparation, a preview of tax changes and convenient online tools, you can approach the upcoming tax season with confidence.
Get Ready by gathering tax records
When filers have all their tax documentation gathered and organized, they’re in the best position to file an accurate return and avoid processing or refund delays or receiving IRS letters. Now’s a good time for you to consider financial transactions that occurred in 2022, if they’re taxable and how they should be reported.
It is recommended that you develop an electronic or paper record-keeping system to store tax-related information in one place for easy access. You should keep copies of filed tax returns and their supporting documents for at least three years.
Before January, taxpayers should confirm that their employer, bank and other payers have their current mailing address and email address to ensure they receive their year-end financial statements. Typically, year-end forms start arriving by mail or are available online in mid-to-late January.
You should carefully review each income statement for accuracy and contact the issuer to correct information that needs to be updated.
Get Ready for what’s new for Tax Year 2022
With the end of the year approaching, time is running out to take advantage of the IRS' Tax Withholding Estimator. This online tool is designed to help you determine the right amount of tax to have withheld from their paycheck. Some people may have life changes like getting married or divorced, welcoming a child or taking on a second job. Others may need to consider estimated tax payments due to non-wage income from unemployment, self-employment, annuity income or even digital assets, all of which can affect your withholding amount.
The last quarterly payment for 2022 is due on January 17, 2023. The Tax Withholding Estimator can help you determine if there is a need to adjust their withholding, consider additional tax payments, or submit a new W-4 form to their employer to avoid an unexpected tax bill when they file.
As you gather tax records, they should remember that most income is taxable. This includes unemployment income, refund interest and income from the gig economy and digital assets.
You should report the income they earned, including from part-time work, side jobs or the sale of goods. The American Rescue Plan Act of 2021 lowered the reporting threshold for third-party networks that process payments for those doing business.
Prior to 2022, Form 1099-K was issued for third-party payment network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. Now a single transaction exceeding $600 can trigger a 1099-K.
The lower information reporting threshold and the summary of income on Form 1099-K can help you track the amounts received more easily. There’s no change to the taxability of income. All income, including from part-time work, side jobs or the sale of goods 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, or any other information return.
Remember, money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.
Those who receive a 1099-K reflecting income they didn’t earn should call the issuer. The IRS cannot correct it.
Credit amounts also change each year like the Child Tax Credit (CTC), Earned Income Tax Credit (EITC) and Dependent Care Credit. You can use the Interactive Tax Assistant on IRS.gov to determine your eligibility for tax credits. Some people may qualify this year for the expanded eligibility for the Premium Tax Credit, while others may qualify for a Clean Vehicle Credit through the Inflation Reduction Act of 2022.
No above-the-line charitable deductions. During COVID, taxpayers could take up to a $600 charitable donation tax deduction on their tax returns. However, 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 tax year 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.Review the changes under the Inflation Reduction Act of 2022 to qualify for a Clean Vehicle Credit.
Refunds may be smaller in 2023 as people will not receive an additional stimulus payment with a 2023 tax refund because there were no Economic Impact Payments for 2022. In addition, business owners who don’t itemize and take the standard deduction, won’t be able to deduct their charitable contributions.
Renew expiring tax ID numbers
You should ensure that your Individual Tax Identification Number (ITIN) hasn’t expired before filing a 2022 tax return. Those who need to file a tax return, should submit a Form W-7, Application for IRS Individual Taxpayer Identification Number now, to renew their ITIN. Taxpayers who fail to renew an ITIN before filing a tax return next year could face a delayed refund and may be ineligible for certain tax credits. Applying now will help avoid the rush as well as refund and processing delays in 2023.
Bookmark the following tools on IRS.gov
Online tools are easy to use and available for you 24 hours a day. They provide key information about tax accounts and a convenient way to pay taxes. IRS.gov provides information in many languages and enhanced services for people with disabilities, including the Accessibility Helpline. Taxpayers who need accessibility assistance may call 833-690-0598. Taxpayers should use IRS.gov as their first and primary resource for accurate tax information.
Let Us Help You page. The Let Us Help You page on IRS.gov has links to information and resources on a wide range of topics.
Online Account. An IRS online account lets taxpayers securely access their personal tax information, including tax return transcripts, payment history, certain notices, prior year adjusted gross income and power of attorney information. Filers can log in to verify if their name and address is correct. They should notify IRS if their address has changed. They must notify the Social Security Administration of a legal name change to avoid a delay in processing their tax return.
Interactive Tax Assistant. The Interactive Tax Assistant is a tool that provides answers to many tax questions. It can determine if a type of income is taxable and eligibility to claim certain credits or deductions. It also provides answers for general questions, such as determining filing requirement, filing status or eligibility to claim a dependent.
Where's My Refund? Taxpayers can use the Where’s My Refund? tool to check the status of their refund. Current year refund information is typically available online within 24 hours after the IRS receives an e-filed tax return. A paper return status can take up to four weeks to appear after it is mailed. The Where’s My Refund? tool updates once every 24 hours, usually overnight, so filers only need to check once a day.
Volunteer Income Tax Assistance. The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer free basic tax return preparation to qualified individuals.
Get refunds fast with Direct Deposit
The most convenience way to file a tax return is to file electronically and choose Direct Deposit for the tax refund. Even when filing a paper return, choosing a direct deposit refund can save time. For those who do not have a bank account, the FDIC website offers information to help people open an account online.
Avoid refund delays and understand refund timing Many different factors can affect the timing of a refund after the IRS receives a return. Although the IRS issues most refunds in less than 21 days, the IRS cautions 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 may require additional review and may take longer to process if IRS systems detect a possible error, the return is missing information or there is suspected identity theft or fraud.
Also, 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.
Get your 2022 tax return filed today with RP Financial Services!
If you have any questions regarding your taxes for 2022, give us a call at (720) 712-7724 or book a FREE consultation using the link: https://calendly.com/rpfs/consult-with-ea
#tax #taxes #accounting #business #taxseason #incometax #accountant #finance #smallbusiness #bookkeeping #taxpreparer #entrepreneur #taxrefund #taxreturn #taxprofessional #rpfs #money #taxplanning #payroll #taxation #businessowner #irs #taxconsultant #taxpreparation #taxtips #cpa #audit #accountants #taxtime #taxprep