2023 FILING SEASON CHANGES FOR 2022 TAX RETURNS

2023 FILING SEASON CHANGES FOR 2022 TAX RETURNS

DUE DATE FOR 2022 RETURNS!

The due date to file your 2022 income tax return or extension form is April 18, 2023.

Increased Standard Deduction

For the 2023 tax season, the standard deduction amounts will be increased slightly as in previous years. The new amounts for 2022 tax returns are below. The increased standard deduction will continue to allow more individuals to file without itemizing deductions on Schedule A.

FILING STATUS STANDARD DEDUCTION AMOUNT

Married Filing Joint;

Qualified Widower $25,900

Single; Married Filing Separate $12,950

Head of Household $19,400

Personal Exemption

The personal exemption for the tax year 2022 remains at 0, as it was for 2020; this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.

Tax Rates

For the tax year 2022, the tax rate remains at 37%. All other rates are below based on taxable income levels.

Tax Rate Single Taxable Income

37% $539,900 and higher

35% Over $215,950

32% Over $170,050

24% Over $89,075

22% Over $41,775

12% Over $10,275

10% Less than $10,275

MFJ Taxable Income

37% Over $647,850 and higher

35% Over $431,900

32% Over $340,100

24% Over $178,150

22% Over $83,550

12% Over $20,550

10% Less than $20,550

Tax Rate HOH Taxable Income

37% $539,900 and higher

35% Over $215,950

32% Over $170,050

24% Over $89,050

22% Over $55,900

12% Over $14,650

10% Less than $14,650

Itemized Deduction Limits

There is no limitation on itemized deductions for 2022 tax returns (just as in 2018-2021). The Tax Cuts and Jobs Act eliminated the rule.

AMT Exemption

The Alternative Minimum Tax exemption for 2022 is $75,900. The exemption begins to phase out at an AGI over $539,900 for single taxpayers. The exemption for MFJ taxpayers is $118,100 and begins to phase out with an AGI over $1,079,800.

HSA Contribution Limits

The HSA contribution limit for 2022 has increased to $3,650 for single coverage and $7,300 for family coverage.

Child Tax Credit

The enhanced credit allowed for qualifying children under age six and children under age 18 has expired. For 2022, the initial amount of the CTC is $2,000 for each qualifying child. The credit amount begins to phase out where the modified adjusted gross income exceeds $200,000 ($400,000 in case of a joint return). The amount of the CTC that can be claimed as a refundable credit is limited as it was in 2020, except that the maximum ACTC amount for each qualifying child increased to $1,500.

The increased age allowance for a qualifying child has expired. A child must be under the age of 17 at the end of 2022 to be a qualifying child.

ACTC and bona fide residents of Puerto Rico. Bona fide residents of Puerto Rico may be eligible to claim the ACTC if they have one or more qualifying children—advance child tax credit payments. Bona fide residents of Puerto Rico are no longer required to have three or more qualifying children to be eligible to claim the ACTC. Advance child tax credit payments have yet to be issued for 2022.

Child & Dependent Care Tax Credit

For 2022, the child and dependent care credit are non-refundable. The maximum credit percentage also drops from 50% to 35%. Fewer care expenses are eligible for the credit, too. For 2022, the credit is only allowed for up to $3,000 in costs for one child/dependent and $6,000 for more than one.

Clean Vehicle Credit

Under the new law, people still may be eligible for a tax credit of up to $7,500 for purchasing a new electric vehicle under the renamed Clean Vehicle Credit, and for the first time, starting January 1, 2023, people buying used electric cars may be eligible for a tax credit up to the lesser of $4,000 or 30% of the sales price, depending on their income. Since credits are a dollar-for-dollar reduction of taxes you owe, you can lower your taxes by up to $7,500. After August 16, 2022, the final assembly of the eligible automobile must be in North America.

No Recovery Rebate Credit

There were no stimulus payments in 2022. Therefore, there will not be a recovery rebate credit to claim for stimulus payments not received.

No Charitable Deduction For Non-Itemizers

Unless the deduction is extended later in the year, the only way to claim charitable deductions will be through Schedule A.

Earned Income Tax Credit (EITC)

Age Limits Restored To EIC - The EIC qualifications will return to pre-2021 tax return rules. Therefore, taxpayers who qualified in 2021 that were 65 or older will not be eligible for the EIC in 2022, pending further legislation. Also excluded will be taxpayers aged 19-24 with earned income. The election to use 2019 earned income has also been eliminated. The investment income limitation is also increased from $10,000 to $10,300 and will be adjusted by inflation for years after 2022.

EIC For Taxpayers With Zero Qualifying Children - The credit was expanded in 2022 for taxpayers with zero qualifying children. Those taxpayers will still qualify but for a much lower amount. The maximum for 2022 will be $560 with zero qualifying children.

Educator Expenses/Deduction

For 2022, the deduction teachers can claim for expenses paid out of pocket increases to $300.

Unemployment Exclusion

The $10,200 exclusion for unemployment income was only for 2020 (pending further legislation). Therefore, the unemployment benefits received in 2022 will be taxable on your federal income tax return.

Charitable Contributions

The $300 above-the-line deduction for cash contributions was initially set to expire after 2020 returns. However, the deduction has been extended to 2022 returns with one important update. Previously, the deduction was capped at $300 per return; for 2022, the deduction will be limited to $300 per taxpayer. This means MFJ returns will have the ability to claim a $600 deduction for cash contributions.

The 60% AGI limitation for charitable contributions has also been suspended for 2022.

Forgiven Student Loan Debt

Starting in 2022, most student loan debt incurred for post-secondary education that is forgiven will not be considered taxable income. The rule allowing workers to exclude up to $5,250 of college loans paid by their employer in 2020 from taxable wages was also extended through 2025. The $5,250 cap applies to student loan repayment benefits and other educational assistance an employer offers.

Gift Tax Exclusion

The lifetime estate and gift tax exemption increased to $11.7 million for 2022 ($23.4 million for couples if a portability election is timely made). The gift tax exclusion remains $15,000 per recipient for 2022. This means you can give up to $15,000 ($30,000 if your spouse agrees) to each child, grandchild, or any other person in 2022 without having to file a gift tax return or tap into your lifetime estate and gift tax exemption.

Education Tax Benefits

Starting with 2022, the Tuition & Fees Deduction has been eliminated. However, to help with the loss of the Tuition & Fees deduction, the phase-out thresholds for the Lifetime Learning credit were permanently increased. The phase-out thresholds now mirror the American Opportunity credit.

Premium Tax Credit

The suspension of repaying excess premium tax credits was only for the 2020 tax year (pending further legislation). What that means for 2022 is if you receive an extra premium tax credit for your health insurance premiums, you will have to pay back that amount with your 2022 tax return.

1099-K Forms

Starting in the 2022 tax year, third-party payment settlement networks (e.g., PayPal and Venmo) will send you a Form 1099-K if you are paid over $600 during the year for goods or services, regardless of the number of transactions. Previously, the form was only sent if you received over $20,000 in gross payments and participated in more than 200 transactions. The gross payment amount doesn't include any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts.

Navigating Tax Responsibilities for Cannabis Businesses

If you run a business that deals with cannabis, you need to know your tax responsibilities. The IRS ensures you pay your taxes and follow all regulations, so you must know what to do and when.

Cannabis businesses have unique tax responsibilities

Marijuana businesses have unique tax responsibilities that require them to comply with state and federal laws. They must report their income and expenses, report their cash transactions, and estimate their US federal income taxes.

The IRS has set up special groups to handle cannabis tax audits. These groups may focus on sales tax, excise taxes, and seed-to-sale tracking records.

Several resources are available on the IRS website. For instance, the Tax Bulletin website guides registering for sales tax. There are also helpful videos and publications for the cannabis industry.

While there are several advantages to operating a cannabis business, there are also some disadvantages. One is that cannabis businesses cannot deduct certain everyday business expenses.

The other is that they will charge higher prices to offset the additional taxes. This can put the business out of business. It is essential to protect your investment. Using a professional is a good idea.

One of the most daunting challenges for cannabis businesses is the Internal Revenue Code's section 280E. Section 280E prevents cannabis businesses from taking many of the usual business deductions. In particular, dispensaries are not able to deduct advertising costs or payroll.

IRS provides resources for compliance

The Internal Revenue Service (IRS) has recently provided resources for compliance for cannabis businesses. This is intended to help cannabis business operators improve their tax compliance abilities and ensure that they comply with IRS regulations.

In October, the IRS added a section to its website dedicated to information for cannabis businesses. It has links to helpful guides and information on various topics related to the industry. For example, the page has videos on important industry-related information.

The IRS has also released a 30-page Participant Guide for auditors. It teaches agents how to conduct an effective audit on marijuana-related businesses. Also, the guide suggests ways to obtain information from the owners of marijuana businesses.

The guidance also reminds cannabis taxpayers of their obligations to the IRS. They should be proactive in responding to requests from the IRS and maintaining good records. They should set up appointments with the IRS to discuss their finances.

One of the main challenges for marijuana businesses is managing cash transactions. Some IRS service centers can accept cash payments. However, if a cash transaction exceeds $10,000, the cannabis business must report it with Form 8300 within 15 days.

Failure to report income can result in fines.

If you operate a cannabis business, you must keep track of your cash transactions. The IRS and the Bureau of Cannabis Control (BCC) require you to report your income. Failure to comply could result in fines, revocation of your license, or recall of your products.

To help you understand how to report your income, the IRS recently published a webpage dedicated to the marijuana industry. This page includes links to critical resources for the industry.

The site also provides information about how to file a tax return and make large cash payments. It also includes information on the federal tax filing requirements for marijuana companies.

The most crucial information is that you should report your income to the IRS. Even if you are not in the cannabis business, your payment is subject to federal income taxes. You should also pay your taxes on time to avoid penalties.

The Internal Revenue Service website provides several resources to help you keep your business compliant with the IRS. The tax department has also issued a Marijuana Industry FAQ to help companies to make the most of their federal tax obligations.

Know your investors

If you are planning to open a cannabis business, you need to know your investors and prepare for the many tax responsibilities of this type of industry. Cannabis businesses must pay a lot of money in federal income taxes. They can also face substantial personal tax liability, which means that owners must report their income on their tax returns.

Although cannabis businesses have become more commonplace in recent years, the industry still faces various challenges. First, cannabis businesses are subject to the same laws that apply to other companies, such as taxes and licensing. In addition, marijuana businesses are regulated by a wide array of state and municipal regulatory agencies.

Among these agencies is the IRS, which has special cannabis audit groups to conduct tax audits on cannabis businesses. These audits can include all cannabis taxes, including excise taxes, sales taxes and seed-to-sale tracking records.

Because the federal government has made it illegal for a cannabis business to deduct "ordinary and necessary" expenses, the effective national tax rate on net profits can be extraordinarily high. This makes it essential to ensure that you are paying your taxes promptly and that you can show the IRS that you have made the necessary tax payments.

Ensure you’re licensed

When you decide to start your own cannabis business, you must ensure that you are legally licensed. If you do not, you can run afoul of federal and state laws. In addition, you can lose a lot of money if your license is revoked.

Municipal and state regulatory agencies highly regulate the cannabis industry. This is because of the risks involved in the industry. A marijuana business can also become a conduit for drug traffickers. Whether you are starting a dispensary, a retail store, or a cultivation facility, you need to get legal advice.

For instance, you can't get a license without a criminal record. You must have a solid business plan. That means a credible funding source and a detailed plan for marketing your products.

Getting a marijuana business off the ground can be difficult, especially in light of recent changes to the law. Moreover, you will need to secure a location, hire employees, and build a retail space.

There are dozens of pages of documents to fill out. You'll need to prove your financials, business experience, and ability to follow state rules.

File and pay your taxes on time

When running a cannabis business, you must be aware of the tax obligations you must comply with. The law varies from state to state, so the best way to determine what you need to do is to consult a tax professional.

Taxes are complicated for all businesses. However, cannabis businesses are subject to special rules that may make paying your taxes much more difficult.

If you are running a marijuana business, you need to keep records. This is especially true if you are conducting business in cash. You also need to be able to prove your taxes have been paid.

Unlike other businesses, cannabis businesses cannot deduct the costs of goods sold. But if you can prove your business did have the correct expenses, you can claim some of the tax benefits.

For instance, the IRS has created a webpage dedicated to the tax concerns of the cannabis industry. It offers information on how to file and pay your taxes.

The page has several resources, including a cash-intensive business audit technique guide and an explanation of the most important federal tax filing and payment requirements for marijuana companies.

Report your cash transactions

If you run a cannabis business, you need to report your cash transactions. Even if you do not pay taxes in cash, you must keep track of your income and expenses. It's essential to keep accurate records to avoid an audit.

The IRS has a web page that addresses some of the tax concerns of the cannabis industry. You can find the page in the Forms and Publications section of the site.

The page contains what you need to know about reporting your cash payments. These transactions include single and multi-transaction cash receipts over $10,000. Also, it explains how to write taxes and a few other things.

If you own a marijuana business, you must maintain a bank account with a specific institution. However, many banks do not want to work with you. This can be a significant barrier to paying taxes.

In addition, you need to report estimated US federal income tax payments to the IRS. Aside from this, you must file a form known as the Report of Cash Payments Over $10,000 in a Trade or Business.

Keep good records

Cannabis businesses face special tax obligations, and it is essential to keep good records. This helps you better navigate your tax obligations and protect your investment.

One of the primary challenges in navigating tax obligations for cannabis businesses is the differences in state and federal laws. Although cannabis is legal in many states, it remains classified as a Schedule I controlled substance under the federal government. However, this does not mean that you cannot write off expenses related to your business.

For example, marijuana sellers can claim a refund for sales taxes. Depending on your jurisdiction, you can also deduct expenses related to your cultivation. Keeping good records of your tax obligations will help you avoid a tax audit.

The IRS has formed special cannabis audit groups. These groups are tasked with reviewing cannabis businesses' tax compliance. They also can only shut down operations if taxes are paid. If you need clarification on your taxes, please seek a professional.

Keeping good records of your taxes is essential for any business. In addition to keeping accurate financial records, you must develop procedures to verify customer information.

What's New in Regards to the Tax Reform Publication 5318?

Just to let you know, you should be aware of the changes regarding Tax Reform Publication 5318. If you are involved in the business world, these changes could profoundly impact you. There are also new requirements that you must follow to file your return.

Tax Cuts and Jobs Act changes affect business taxes. As a business owner, you must understand how the Tax Cuts and Jobs Act (TCJA) will affect your business. The law enacted in December 2017 will change several tax laws that affect business owners. This article provides an overview of the critical changes that companies may experience.

Among the most notable changes that TCJA will bring is the corporate income tax rate reduction from 35 percent to 21 percent. In addition, TCJA will also cut the top individual income tax rate from 37 percent to 29.6 percent. These changes are not just crucial to individuals, and they are also critical to small and medium-sized businesses, including partnerships and sole proprietorships.

For example, the TCJA will allow taxpayers to deduct up to 20 percent of their qualified business income. The new deduction is effective for amounts paid after December 31, 2017. It is also temporary. Several businesses that could benefit from the deduction include pharmaceutical companies and those that sell products overseas.

There are also some changes to the business interest deduction. Businesses will no longer be able to deduct interest over 30 percent of their adjusted taxable income. However, they can still deduct the total amount of interest they have already paid. They can also reinvest cash in their business. Some businesses will hire employees or buy equipment. Others may use the money to pay dividends or reduce debt.

Another area of concern for businesses is the TCJA's deemed repatriation tax. This is a tax on earnings earned from foreign affiliates. During the previous year, US companies estimated they had held $2.6 trillion in untaxed earnings in foreign affiliates. TCJA will require domestic corporations to hold a 10 percent stake in a foreign company to avoid paying a deemed repatriation tax.

In addition to reducing the corporate tax rate, the TCJA includes several revenue-raisers. For example, a SALT deduction cap is in place. Also, the TCJA will set a blended tax rate that applies to the total amount of business income.

As a result of TCJA, businesses will be subject to several changes during the next four years. These changes are designed to encourage more investment. Ultimately, these changes can affect how a business evaluates its value. Therefore, experts should assess whether they have adequately factored in the changes to the business tax code.

Some of the TCJA changes will impact the cost of capital. Companies that transition from equity financing to more debt may find that the overall cost of capital will increase. A firm's cost of capital is a crucial part of valuing a business under the income approach.

Another concern for businesses is that the TCJA will limit the ability to deduct net operating losses. Under the previous law, a company could carry out unused losses for up to two years. But the TCJA will allow a business to carry back only 80 percent of its net operating loss for tax purposes.

Requirements for filing

The Tax Cuts and Jobs Act of 2017 have been around for a while now, but it may be a while before you're caught up to speed on the new tax laws. Whether you're an established business, a first-timer, or a tax professional, you need to keep abreast of what's new. Luckily, the IRS has several helpful tools, including publications, forms, and even IRS mobile apps, to help you along the way. An excellent place to start is the official Tax Reform Publication 5318, which you can download for free. It also has a lot of other helpful information, from what the IRS calls a "taxpayer ID" to the most efficient ways to file your taxes.

While it's not a comprehensive list, it provides a solid starting point to get your act together. If you're a small business owner, it's essential to get your arms around the TCJA so you can better manage your cash flow and tax situation. Fortunately, the IRS has several e-file options for small businesses. In particular, you'll want to download the free tax reform e-filing form. Using this form, you'll be able to claim your business's deductions and taxes most efficiently. You may have to do more than one e-filing if you're a large organization, but this e-filing form makes the process as painless as possible.