TAX CHANGES TO KNOW BEFORE FILING YOUR 2022 TAXES

As you know, “In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin wrote to a friend in 1789. I would like to add another certainty of life – change!

And taxes change every year. Below are a few items that could affect your taxes returns when you file in 2023.

While the child tax credit received a temporary boost through the American Rescue Plan of 2021, the enhanced tax breaks were not extended to this year.

In 2021, the child tax credit offered up to $3,600 per child under age 6, and up to $3,000 per child ages 6 through 17, with half available via upfront payments. But for 2022, the tax break reverts to the previous amount — up to $2,000 per child under age 17. And for those who are sharp eyed, you notice that the age for a child to be eligible dropped by a year from under 18 to under 17. This means that if your child turned 17 during 2022, regardless of date, there will not be a child tax credit.

Another major change is for those eligible for the Additional Child Tax Credit. This credit typically applies to those will little income who do not qualify for the Child Tax Credit. The Additional Child Tax Credit was fully refundable in 2021, meaning regardless of income a taxpayer would receive $3,000 or $3,600 per child. In 2020, it reverts back to pre-covid stimulus rules. The maximum Additional Child Tax Credit is now $1,500 per child.

The child and dependent care tax credit, which may help offset the cost of care for children under age 13 or adult dependents, has also been reduced back to pre-covid stimulus rules.

In 2021, the credit jumped to 50% of childcare expenses up to $8,000 for one qualifying person or $16,000 for two or more dependents. However, for 2022, those caps returned

25% of expenses up to $3,000 and $6,000, for one or multiple dependents, respectively.

1099-Ks

If you’ve received payments through apps like Venmo or PayPal in 2022, you may get Form 1099-K in early 2023, which reports income from third-party networks.

The form applies to business transactions, such as parttime work, side jobs or selling goods, according to the IRS.

Before 2022, the federal Form 1099-K reporting threshold was for taxpayers with more than 200 transactions worth an aggregate above $20,000. Now, however, the threshold is just $600, and even a single transaction can trigger the form.

While the IRS says you shouldn’t receive Form 1099-K for personal transfers, experts say it’s possible, and the error may require you to contact the issuer or make adjustments to your tax return.

Your tax refund may also be lower because it’s more difficult to claim the charitable deduction in 2022.

Congress gave charities a boost in 2021 by allowing single donors to claim a deduction for up to $300 for cash donations or $600 for married couples filing together in addition to the standard deduction.

However, the tax break wasn’t extended for 2022. Now, you’ll only benefit if your itemized deductions, including the tax break for charitable gifts, exceeds the standard deduction, which is less common. In 2019, almost 90% of taxpayers used the standard deduction, according to the IRS.

So, wow, these are just a few of the many changes for this upcoming tax season. Our tax professionals receive over 30 hours of update and tax training each year. Come see a professional and stop worrying about knowing all these changes. We can be reached at 336-629-4700 or come visit us Liberty Tax, 405 E. Dixie Drive in Asheboro.

Ryan Dodson has a Masters in Accounting from North Carolina State University. He worked in public accounting with Deloitte and Arthur Andersen. He and his wife Tiffany own and operate Liberty Tax Service.