Tips from our owner Rick Behm on tax preparation.
Tax Tips from Rick
With the 2022 Income Tax filing season quickly approaching, now it the time to be aware of changes for 2022. These tax code changes will result in our tax preparers spending time being updated on the new tax codes, updating their worksheets, and learning about the changes to the federal and state tax forms. But be prepared, as politicians are making noise in preparation for another fun-filled year of late-breaking changes to the tax codes. Here is what we know now.
Federal Income Tax:
Tax filing deadline is Monday, April 18th, 2022
For Federal, Wisconsin and most other states, because the April 15th is a Saturday and Monday is Emancipation Day the file date has been moved to Tuesday, April18th, 2023.
Say Goodbye to those tax-friendly pandemic provisions
a. The Expansion for Child Tax Credits. The credit reverts back to the way it was for
2018-2019. $2,000 per child under age 17 at the end of the year.
b. The expansion of the Earned Income Tax Credit. This credit reverts back to taxpayers
ages 25-64 and the childless credit maximum decreases to $560.
c. The expansion of the Child & Dependent Care Tax Credit. This credit reverts back to
2021 levels and is no longer refundable. The dollar limit for eligible expenses returns
to $3,000 for one child and $6,000 for two or more.
d. The expansion of Premium Assistance Rule for Taxpayers who receive unemployment.
This extremely generous “free health insurance” is no longer available for those who
collected unemployment compensation in 2022.
e. The Economic Impact Payment program is no longer. The three Recovery Rebate
checks program to assist taxpayers through the Pandemic has ended.
f. The “Above the Line” $300.00 in charitable contributions is gone. All charitable donations are now back on Schedule A if you qualify.
Residential Clean Energy Credit increased for 2022: (Formerly Residential Energy Efficient Property) The tax credit is increased to 30% for qualified expenditures in 2022. The rate is reduced in stages after 2032. Prior law allowed a 26% tax credit for solar electric, solar hot water, fuel cell, small wind energy, geothermal, heat pump and bio-fuel property installed in homes.
Changes to 1099-K reporting
Changes are in store for third-party settlement organizations, such as credit cards providers and mobile payment services and many gig workers (like Uber, Lift, Etsy,E-bay, etc) The new reporting threshold associated with Form 1099-K, Payment Card and Third-Party Network Transactions were reduced to:
*1099-K’s have to be issued for any person receiving $600 or more in payments for
the calendar year.(Was $10,000 per year).
* No Minimum number of transactions for the year. (Was 2,000 transactions)
Note: The IRS recently moved these reporting changes to go into effect for tax year 2023, but some of you still might be receiving these new 1009-K this year.
If you are 72 by the end of the year – you must take a required Minimum Distribution (RMD) from your Retirement Accounts (IRA’s ,401(k)’s , etc.)
Make sure you check with your financial advisors to see if you are required to take the RMD and how much you need to take out. This mandatory RMD age increases to 73 years of age in 2023.
Educators Expense Deduction
The tax deduction for educators with classroom expenses increases to $300.
Wisconsin Income Tax:
All Charitable Contributions go on federal Schedule A (same aa federal)
Investment Income limits for Earned Income Credits stay at $3,800 and EIC is only available for Married Filing Joint (MFJ) filers.
If Student Loan Forgiveness takes effect – the total amount forgiven is taxable Wisconsin income.(Non-taxable on federal income taxes).
Wisconsin Child & Dependent Tax Credit subtraction is NO longer available. NEW CREDIT is 50% of federal Child & Dependent Tax Credit. (not available for part-year or non-residents)
Wisconsin is asking for taxpayer’s email addresses (both spouse’s) if they wish to receive all Wisconsin Tax correspondence from Wisconsin Department of Revenue.
Effective in 2023 – Capital Loss deduction increases to $3,000 per year (up from the current $500).
Edvest or Tomorrow Scholar 529 Plans can subtract a maximum of $3,560 per student.
Illinois Income Tax
The Illinois Family Relief Plan that went into effect on July 1, 2022, there is a one-time Individual income and property tax rebates to Illinois residents that meet the income requirements.
a. Individual Income Tax Rebate: If your 2021 AGI was under $200,000 (Single) and
$400,000 (Joint) you may qualify for a $50 for Single; $100 MFJ and $100 per
dependent with a maximum of three dependents ($300).
b. Property Tax Rebate: Your rebate amount is equal to the property tax credit you were
qualified to claim on your 2021 IL-1040 (up to a maximum of $300) if your AGI was
under $250,000 (Single) and $500,000 (Joint) if you are an Illinois resident and you
paid property taxes in 2021 on your primary residence