As the tax preparer, you are the one who is responsible for ensuring that your client’s tax returns are filed properly and on time. It can be quite the responsibility, but it is possible as long as you’re updated on the tax rules and regulations within the US while utilizing software that can help you in your endeavors.
Tax preparers should be in the midst of creating or filing the 2022 tax returns that they will need to file in 2023. This is because the new tax laws enacted previously may be eliminated.
To name a few, there’s the Private Mortgage Insurance Deduction, Health Coverage Tax Credit, Sick Leave and Family Leave for the Self Employed and more. But, in addition to the expiration of these tax breaks, there are several other changes that tax preparers need to be aware of for this tax season.
Let’s delve into some of the examples:
1) Child and Dependent Care Credit
Certain tax provisions for the extended Child & Dependent Care Credit have already reverted back to an older version at the end of 2022, returning to its original 2020 provisions. The most notable limit would be how the child and dependent care credit is no longer refundable.
In addition to that, there will be certain expense limits that will apply to 2022 tax returns. Tax preparers can expect about a $3,000 expense limit for one qualifying child. For more than one qualifying child, the expense limit is $6,000.
2) COVID Retirement Plan Contribution
Amid the pandemic, taxpayers were encouraged to take an early retirement distribution through their returns, going up to $100,000 without penalty. However, this distribution was spanned out over three years of tax returns.
The first installment was recognized on a taxpayer’s 2020 tax return, while the second one was on their 2021 tax return. Following that pattern, the third and final installment on their 2022 tax return with the use of Form 8915-F.
3) Energy- Efficient Tax Credits
The US tax code regarding energy efficiency is constantly changing. In the past, there have been tax credits available for energy-efficient home improvements, such as insulation, windows, and heating and cooling systems. There will be an extension for them to consider as 2022 returns are filed.
For instance, tax preparers should be aware of the new tax credit for alternative fuel vehicles. This credit, which is around $7,500, applies to a variety of alternative fuel vehicles, including hybrid cars, electric cars, and fuel-cell cars.
4) Premium Tax Credits
The amount of a person’s premium tax credit is typically based on the cost of the health plan premium and the household income. The premium tax credit is available to help pay for health plans purchased through the health insurance marketplace.
Essentially, taxpayers can use this tax credit to lower monthly payments on their health insurance. While this credit was initially meant to expire in 2021, it has been extended until 2025. It’s best to take this in mind when filing 2022 returns.
Conclusion
The rules surrounding the tax code are constantly changing, and it’s important to be aware of the most recent changes. By familiarizing themselves with these changes, tax preparers can ensure that they can properly prepare their clients’ returns for the upcoming tax year. Keystone Tax Solutions is a leader in the industry, offering the best professional tax software for tax preparers. Get in touch with us today!
