2022 Tax Return Filings: Time to Start Planning
As tax year 2022 nears an end, preparing to file your 2022 tax returns is a priority – and December is a great time to start thinking about what you will need.Consider the following now to make the process smoother:
Prior to 2022, Form 1099-K was issued for third party network transactions (i.e., credit card transactions) only if the total number of transactions exceeded 200 and the aggregated amount of these transactions exceeded $20,000 for the year. For 2022, a single transaction exceeding $600 can trigger a 1099-K.
Money through third party payment networks, such as Venmo, PayPal, Cash App, etc., from friends and relatives as personal gifts or reimbursements is not taxable. If you receive an erroneous 1099-K, contact the payer on the upper left corner on the form immediately.
If you are receiving Form 1099-K for the first time, don’t forget to include the form in your tax documents.
2. Tax credits return to 2019 level:
Child Tax Credit (CTC): The maximum credit for a qualifying child reverts to $2,000 for tax year 2022, down from $3,600 in 2021. It is no longer a fully refundable credit, and there is no advanced child tax credit in 2022.
Child and Dependent Care Credit: The maximum credit reverts to $3,000 for one qualifying person ($6,000 for two or more qualifying persons) in 2022, decreased from $8,000 for one person ($16,000 for two or more persons) in 2021.
3. If you made energy efficiency improvements to your home in 2022:
The Nonbusiness Energy Property Credit allows a credit for energy efficiency improvements such as insulations, exterior doors, and windows. The maximum credit is $500 – and since it is a lifetime credit, if you have already taken the maximum credit of $500 in prior years, you may not take this credit in 2022.
If you made these types of improvements in 2022, be sure to include the information and receipts with your tax return information. The amount for exterior windows is limited to $200.
4. If you dealt with cryptocurrency in 2022:
Be mindful of the question you need to answer on your 2022 tax return: “At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
You may receive reporting statements such as 1099-B to report your gains and losses.
5. If you expect to receive Form W-2 for wages earned or Forms 1099 for non-employee compensation or investment income:
Most of these tax documents will be sent to you or available to download in early February 2023.
6. If you made charitable contributions this year:
Certain cash contributions up to $300 (or $600 for married couples filing jointly) deducted for non-itemizers for tax year 2020 and 2021 will no longer be deducted in 2022 if you take standard deduction.
Receipts and records should be maintained to support the deduction. See our prior blog article Charitable Contribution Deductions.
7. If you made retirement plan contributions this year:
You should receive documentation from the retirement plan administrator with the amounts contributed.
Depending upon your situation, some contributions may be deductible.
Certain taxpayers may receive a credit for contributions to retirement plans.
8. If you reached age 72 during the tax year:
Remember that you are required to take Required Minimum Distributions (RMD) from your IRA.
IRA owners over 70.5 have the option to transfer up to $100,000 to charity tax free (Qualified Charitable Distributions) and it counts towards their annual RMD.
9. If you made estimated tax payments this year:
Summarize amounts and dates paid for all income tax estimated payments:
Check if you need to make 4th quarter estimated payments. The due date is January 17, 2023.
The IRS suggests creating an account to manage records for these payments at www.IRS.gov.
10. If you made gifts during this year:
For gifts made in 2022, including cash, greater than $16,000 per recipient provide:
Recipient relationship to donor (if any)
If publicly traded securities, CUSIP number
If closely held entity stock, EIN
11. If you had other potential tax-deductible expenses this year:
The following expenses may be eligible for tax deductions or tax credits:
Education expenses – Keep records of amounts paid, dates, and the educational organization receiving the payments.
Medical expenses – Keep records of the amounts paid, dates paid, and nature of the expense if you are anticipating taking itemized deduction.
Home mortgage interest – You should receive Form 1098 in early February.
State and local taxes – Includes income taxes and property taxes. Income taxes withheld will be reported on Forms W-2. Keep records of estimated tax payments (see 9 above) and amounts and dates of property tax payments. NOTE: Under current tax law the combined deduction for state and local taxes is limited to $10,000 ($5,000 if Married Filing Separately).
ConclusionWhile the above are suggestions to help you gather the information necessary to prepare your 2022 tax return, please contact your Herbein tax return preparer if you have questions regarding this article or any other tax return preparation question.
Article prepared by Cindy Wang