Maximize your tax refund by getting ahead of this year’s filing changes in the U.S.
Preparing and executing your tax preparation plan is a daunting task. While there are many aspects that can make filing taxes complex, one of the primary nuances is because of the changes that happen every year. For the 2022 tax year (returns filed in 2023), there have been changes in standard deductions, tax brackets, and other tax provisions that can have looming effects on your process and preparation.
While it sounds like tax returns are a bit more complex this year, the good news is that most of these changes have positive implications for taxpayers. As long as you can navigate through the changes and identify them, you can use them to benefit your business and get more out of your 2022 returns.
Below, you can find a summary of some of the bigger and more significant changes you should consider. For a full and extensive list of these tax changes from the IRS, you can click here.
Table of Contents
Charitable Donations Changes
Prior to 2021, taxpayers who claimed the standard deduction could not claim a deduction for charitable contributions. Last year, a temporary tax change enacted in the CARES Act allowed taxpayers to claim a deduction of up to $300 for cash contributions made to qualifying charities in the year 2021. It increased to $600 for those filing married and filing jointly for income taxes. Unfortunately, that temporary provision wasn’t extended by Congress, so now you have to itemize deductions in order to benefit from your charitable donations at tax time.
If you’re donating gifts as a corporation, you can claim up to 10% of your taxable income annually, applying your donation as a deduction against taxable income. Anything over the limit must be carried forward.
For individuals who itemize their deductions, they can write off up to 60% of the adjusted gross income (AGI) as a qualified charitable contribution. Remember, you can use the IRS’s Tax Exempt Organization Search tool to see the categories and if a potential charity is registered. Generally, most religious, environmental, animal, educational, and health-related charities qualify.
For more tax credits small business owners should know about, click here.
If you accept payments through third-party apps like PayPal, Venmo, Zelle, or Cash App, you might receive a 1099-K form for the first time this year.
The American Rescue Plan made changes to 1099-K reporting requirements for third-party payment networks. Previously, you would only get a 1099-K if you had more than 200 transactions or accepted more than $20,000 in payments.
Beginning with the 2022 tax year, that threshold dropped to $600 in payments, and no minimum number of transactions.
Of course, you were already required to report those earnings to the IRS, but this change makes it easier for the IRS to verify the amounts you report against the transactions reported by the payment apps.
If you used those apps to accept payments from friends or family members, you don’t have to pay taxes on it—only if you earned income from selling goods and services.
Deferred Social Security Payments
Under the CARES Act, employers could defer deposits of the employer portion of Social Security. Now, those payments are due. Half was due at the end of 2021, and the other half is due at the end of 2022. If you didn’t repay those deposits on time, the IRS warned it will consider all of the deferral invalid and assess penalties and interest on those deferred taxes starting from the original due date.
100% Bonus Depreciation
The 2022 tax year is the last year that businesses can take advantage of 100% bonus depreciation.
Bonus depreciation allows businesses to write off the cost of qualified equipment and other property in the first year it’s placed in service rather than depreciating it in smaller amounts over its useful life.
In 2023, the bonus depreciation limit drops to 80%, and it will be reduced by 20% per year until bonus depreciation is completely phased out in 2027 (unless Congress extends it).
If you purchased any furniture, equipment, or other qualified property for your business in 2022, claiming bonus depreciation on those assets can result in some serious tax savings.
Maximize Your Tax Refund
With all the changes in tax rules and a lot of regulations returning to their pre-pandemic form, it’s important to collaborate and cross-reference with your accountant or tax professional more than ever to ensure the maxmize tax refund amount possible. Not only is this tax season coming equipped with the usual stresses, but the IRS is also dealing with an overwhelming backlog of returns, and a general lack of responsiveness.
Learn How Damona, a Relationship Coach, Uses FreshBooks to Make Tax Time a Breeze
This post was updated in December 2022.