What’s important to you as you prepare to file? Your situation can make a big difference in the tax you pay and the paperwork you have to file. The IRS is trying to get you off to a good start this filing season by listing some of the issues the Agency believes are important to a wide range of filers. Here’s what you need to know as you get ready for taxes.
Reporting rules changed for Form 1099-K
Taxpayers should receive Form 1099-K, Payment Card and Third Party Network Transactions, by the end of January, if they received third party payments in tax year 2022 for goods and services that exceeded $600. 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.
Note that before 2022, Form 1099-K was issued for third party network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. The American Rescue Plan Act of 2021 lowered the reporting threshold for third party networks that process payments for those doing business.
Now a single transaction exceeding $600 can require the third party platform to issue a 1099-K. Money received through third party payment networks from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.
Some tax credits return 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, Earned Income Tax Credit and Child and Dependent Care Credit.
- Those who got $3,600 per dependent in 2021 for the CTC will, if eligible, get $2,000 for the 2022 tax year.
- For the EITC, 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.
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.
Increased eligibility for the premium tax credit
For tax year 2022, taxpayers may still qualify for temporarily expanded eligibility for the premium tax credit. As explained by the IRS, the premium tax credit – also known as PTC – is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace. To get this credit, you must meet certain requirements and file a tax return with Form 8962, Premium Tax Credit.
Not Sure Whether You’re Ready for Taxes in Summerlin?
These are just a few of the changes. Work with your tax professional to make sure you’re taking advantage of all the provisions applicable to you. Here at Layton Layton & Tobler we help our clients do just that. Contact us today to schedule a consultation. We can also help you with payroll preparation and auditing.
Helping You Get Ready for Taxes in Summerlin
Serving Las Vegas, Summerlin & Henderson
Posted on February 9, 2023 | Published by Ignite Local | Related Local Business