According to a 2022 Annual Accounting Industry Survey, unprepared and late clients posed the greatest difficulty to organizations. Now, the Internal Revenue Service (IRS) is offering advice and early assistance in reducing this issue for the 2023 tax season.
Read on to discover everything you have to know about tax filing in 2023.
Reporting Modifications to the 1099-K Form
Taxpayers who received more than $600 in third-party payments for goods or services in 2022 are required to acquire Form 1099-K, which includes credit card payments and third-party network transactions.
Prior to 2022, Form 1099-K was only provided for third-party network transactions if all of the following conditions were met, such as the number of transactions has surpassed 200 and if all transactions are worth at least $20,000.
The American Rescue Plan Act of 2021 (ARPA) lowered the threshold for reporting third-party networks that accept corporate payments. As such, for transactions exceeding $600, the third-party platform must generate a 1099-K by 2022. This decision will result in a greater number of 1099-K forms being issued to taxpayers.
Prepare clients who will be affected by this change now in order to avoid panicky phone calls when the 1099-Ks are released. It is critical to reassure clients that cash received as personal gifts or reimbursement for personal expenses acquired through third-party payment networks is not taxable.
2019 Tax Credits Have Been Reintroduced
After 2021, some tax credits will be restored to pre-pandemic levels. The Child and Dependent Care Credit, CTC (Child Tax Credit), and EITC (Earned Income Tax Credit) are all affected. These changes will undoubtedly reduce tax refunds. They include:
- CTC recipients who earned $3,600 per dependent in 2021 and are eligible will get $2,000 in 2022.
- Taxpayers who have children who are eligible for the EITC in 2022 will receive $500 instead of $1,500.
- The maximum Child and Dependent Care Credit is reduced from $8,000 in 2021 to $2,100 in 2022.
Tax experts should be aware that the above-the-line deduction has expired, and many individuals believe it is still available to standard deduction claimants. Customers should be informed as well so that they can adjust accordingly and in a timely manner.
The Absence of Above-The-Line Charity Deductions in 2022
Taxpayers could deduct $600 for charitable contributions during COVID-19. Taxpayers who take the standard deduction will no longer be allowed to deduct charitable contributions above the threshold after 2022.
Tax experts should be aware that the above-the-line deduction has expired, and many individuals believe it is still available to standard deduction claimants. Customers should be informed so that they can adjust.
Premium Tax Credits (PTC) May Be Offered to More Taxpayers
The PTC is a refundable benefit that supports eligible people and families in paying for health insurance premiums through the Health Insurance Marketplace.
The ARPA temporarily enhanced eligibility for the premium tax credit to encompass taxpayers with family incomes exceeding 400% of the federal poverty line for tax years 2021 and 2022.
Updated Qualifications for the Clean Car Tax Credit
The Inflation Reduction Act of 2022 (IRA) has made numerous modifications to electric and clean vehicles. The Inflation Reduction Act of 2022 limits section 30D (EV credit) tax incentives to eligible electric vehicles constructed after August 16, 2022, in North America.
The DOE (Department of Energy) has identified electric vehicles that may meet the final assembly required for the 2022 and 2023 model years. Because certain vehicles on the DOE’s list are assembled in numerous locations, they may need to meet the final assembly criterion.
Before recommending that a client purchase a vehicle with a clean auto credit, tax professionals should review the IRA adjustments to see who and what qualifies.
Conclusion
When it comes to tax filing, information, compliance, and preparedness are key components of the process. While it may be tempting to put this off, do not succumb to the temptation of not getting to work! Now with everything you have to know about the 2023 tax filing season, there should be no more excuses. Keystone Tax Solutions offers the best professional tax software. With an experienced team and a loyal clientele, our team can help you through access to professional tax software, services, and unrivaled rates. Get a FREE demo today!
