Things You Should Know to Get Ready for Tax Day (cue “The Tax Man” by the Beatles)

First of all, you have to figure out what is important to you and the IRS as you prepare your tax forms.  Each situation is different and can make a huge difference in the amount you pay in taxes and the paperwork you have to file. The IRS is helping you get off to a good start this year by listing some of the issues the Agency believes are important to a wide range of filers.

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 the tax year 2022 for goods and services that have exceeded $600. The taxability remains the same for 2022. All income, including from part-time work, side jobs, or the sale of goods is still taxable. Taxpayers are supposed to report all income on their tax return unless it’s excluded by law. 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 were allowed to 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 the year 2022, taxpayers may still qualify for temporarily expanded eligibility for the premium tax credit. This is 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.

These are just a few of the changes. The best advice I can give you is to work with your tax professional to make sure you’re taking advantage of all the provisions applicable to you. If you’d like me to refer you to someone, please let me know.

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Choose to have an amazing day….Jeff

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