TAX TIPS
While we don’t usually think of the Internal Revenue Service as our friend, they offer many resources to assist taxpayers. Among them is Publication 17, Your Federal Income Tax (For Individuals).
Publication 17 covers the general rules for filing a federal income tax return and supplements the information contained in your tax form instruction booklet.
A few important issues Taxpayers should make sure they have all their tax documents before filing a return, including Forms W-2 from employers, Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, interest and pension, annuity or retirement plan distributions.
Creating an IRS Online Account can help taxpayers securely access information about their federal tax account, including refunds and payments, and tax records.
Changes to credits and deductions for 2022 Unlike 2020 and 2021, there were no new Federal stimulus payments for 2022. The IRS finally decided Colorado stimulus payments received in 2022 are not taxable.
Some tax credits return to 2019 levels. Changes include amounts for the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC) and the Child and Dependent Care Credit will revert to pre-COVID levels.
• For the EITC, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 for the 2022 tax year.
• Those who got $3,600 per dependent in 2021 for the CTC will, if eligible, get $2,000 per dependent for the 2022 tax year.
• The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
Finally, taxpayers that don’t itemize and take the standard deduction cannot deduct $300 of their charitable contributions from adjusted gross income this year.
Obtaining the Credit for Other Dependents Taxpayers with dependents who don't qualify for the Child Tax Credit may be able to claim the Credit for Other Dependents. They can claim this credit in addition to the Child and Dependent Care Credit and the Earned Income Credit. The maximum credit amount is $500 for each dependent who meets certain conditions.
This credit can be claimed for:
• Dependents of any age, including those who are age 18 or older.
• Dependents who have Social Security numbers or Individual Taxpayer Identification numbers.
• Dependent parents or other qualifying relatives supported by the taxpayer.
• Dependents living with the taxpayer who aren't related to the taxpayer.
A taxpayer can claim this credit if:
• They claim the person as a dependent on the taxpayer's return.
• They cannot use the dependent to claim the child tax credit or additional child tax credit.
• The dependent is a U.S. citizen or resident alien.
Deductible business mileage rates For sole proprietors and single-person LLCs filing Schedule C, as well as corporations and partnerships, filers can elect to use actual automobile expenses or IRS mileage rates for business use of vehicles purchased during the year. The method elected for a specific vehicle must be used throughout its life. For 2022, the mileage rate is 58.5 cents for the first six months and 62.5 cents for the last six months. For 2023, the business rate is 65.5 cents per mile. An odometer record is required to be maintained for either method.
Please email questions to larry@larryperrycpaservices . com.