NEW YORK — The IRS encouraged taxpayers to take important steps this December to file their 2022 federal tax returns.
This is the second in a series of reminders to help taxpayers prepare for the upcoming tax filing season. a page of “Steps to take now to prepare for your taxes”, updated and available at IRS.govoutlines steps taxpayers can take now to make filing taxes easier in 2023.
Here’s what’s new and some key items taxpayers should consider before filing next year.
Reporting rules changed for Form 1099-K
Taxpayers must receive the Form 1099-K, Payment card transactions and third-party networkbefore January 31, 2023, if you received third-party payments in tax year 2022 for goods and services that exceeded $600.
There are no changes in income taxation. All income, including from part-time work, side jobs, or the sale of property, is still taxable. Taxpayers must report all income on their tax return unless excluded by law, whether they receive a Form 1099-K, a Form 1099-NEC, Non-Employee Compensation or any other statement of information.
Prior to 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 total amount of these transactions exceeded $20,000. The American Bailout Act of 2021 lowered reporting threshold for third-party networks that process payments for those who do business.
Now, a single transaction that exceeds $600 may require the third-party platform to issue a 1099-K. Money received through third-party payment networks from friends and family as personal gifts or reimbursements for personal expenses is not subject to tax.
The IRS warns people in this category who may be receiving a Form 1099 for the first time, especially “early filers” who typically file a tax return during the month of January or early February, to be careful and make sure to have all your key income documents before filing a tax return. A little extra caution could save individuals additional time and effort associated with filing an amended tax return. And if they have untaxed income on a Form 1099 that isn’t reflected on the tax return they initially file, that could mean they need to file a tax payment with an amended tax return.
If the information on the 1099-K is incorrect, taxpayers should immediately contact the payor, whose name appears in the upper left corner of the form. The IRS cannot correct it.
Some tax credits return to 2019 levels
This means that affected taxpayers will likely receive a significantly smaller refund compared to the previous tax year. The changes include amounts for the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC), and the Credit for Child and Dependent Care.
- Those who received $3,600 per dependent in 2021 for the CTC, if eligible, will receive $2,000 for tax year 2022.
- For the EITC, eligible taxpayers without children who received approximately $1,500 in 2021 will now receive $500 in 2022.
- The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
Visit credits and deductions for more details.
No above the line charity deductions
During the COVID-19 pandemic, taxpayers may be able to take a charitable contribution tax deduction of up to $600 on their tax returns. However, in 2022, those who take a standard deduction cannot take an above-the-line deduction for charitable contributions.
More people may be eligible for the Premium Tax Credit
For tax year 2022, taxpayers may still qualify for temporarily expanded eligibility for the prime tax credit.
Eligibility rules changed to claim a clean energy vehicle tax credit
check the changes under the Inflation Reduction Act of 2022 to qualify for a Clean Vehicle Credit.
Many different factors can affect the timing of a refund after the IRS receives a return. Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a 2022 federal tax refund by a certain date, especially when making large purchases or paying bills. Some returns may require additional review and may take longer to process if IRS systems detect a potential error, missing information on the return, or suspected identity theft or fraud.
Also, the IRS cannot issue refunds for people who claim the EITC or the Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to withhold the entire refund, not just the portion associated with the EITC or ACTC.
The last quarterly payment for 2022 is due January 17, 2023. Taxpayers may need to consider estimated or additional tax payments due to unearned income from unemployment, self-employment, annuity income, or even digital assets. The Withholding Tax Estimator at IRS.gov can help wage earners determine if they need to consider an additional tax payment to avoid an unexpected tax bill when they file their return.
Gather 2022 Tax Documents
Taxpayers should develop a paper or electronic record-keeping system that keeps important information in one place. This includes year-end income documents such as W-2 forms from employers, 1099 forms from banks or other payers, 1099-K form from third-party payment networks, 1099-NEC form for non-employee compensation, 1099-MISC form for miscellaneous income or Form 1099-INT if you were paid interest, as well as records documenting all digital asset transactions.
Making sure their tax records are complete before filing helps taxpayers avoid errors that cause processing delays. When they have all their documentation, taxpayers are in the best position to file an accurate return and avoid delays in processing or refunds or letters from the IRS.