Preparing Yourself for the 2023 Tax Season

With the flip of the calendar, we’re officially into 2023. There’s ample opportunity in the new year to put ourselves in a position to take advantage of the many opportunities 2023 has to offer, but we also have to keep in mind it’s almost time to look back on 2022 when tax season gets underway.

Each year, the IRS guidelines around tax returns change in some fashion. We want to make sure you’re prepared for those changes and able to avoid any future trouble with the IRS.

Gather All Necessary Documents

The first step to getting ahead of tax season is to get everything you need to file your taxes together. This will include receipts, pay stubs, documentation of business expenses, bank statements, and more. We covered this in our blog last March on planning ahead for this year’s tax season.

Prepare for Form 1099-K

Many taxpayers have never had to concern themselves with Form 1099-K but more taxpayers will now need to understand what the form is for. Form 1099-K is used to report payments made using third-party payment systems for goods and services.

Anyone who received more than $600 in 2022 on apps like Venmo, CashApp, PayPal, or other similar apps is likely to receive Form 1099-K from those companies. Banks will also do the same if you received payments from debit or stored-value cards. Businesses will also receive this form under the same circumstances.

When filing an amended return for a year prior to 2022, the taxpayer must have received at least 200 transactions worth a total of at least $20,000. The $600 limit applies to tax years 2022 and after.

Certain Tax Credits Revert to Pre-COVID Levels

The last few years have seen a boost to tax credits such as the Child Tax Credit and the Earned Income Tax Credit. COVID-19 pushed the government to increase these credits and alter how and when they can be applied, but those circumstances are no longer present.

This year, the Child Tax Credit will return to $2,000 for those who received a $3,600 credit on their 2021 return. The Dependent Care Credit returns to a maximum of $2,100 as opposed to the $8,000 limit set in 2021.

The expanded eligibility for the Premium Tax Credit as part of the American Rescue Plan remains at the same level as in 2021. This applies to eligible taxpayers who purchased health insurance plans through the Health Insurance Marketplace.

Clean Vehicle Credit

The Inflation Reduction Act brought with it an altered credit for those who purchase, manufacture, or sell clean vehicles. Instead of having to file for a rebate after the purchase of an electric vehicle, buyers can now claim the tax credit upfront at the dealership. Small businesses that use electric vehicles for their company fleet can also get increased credit.

IRS guidelines to secure these credits are tight, so it’s important to have an understanding of how and when you can receive the credit before claiming the credit on your tax returns.

Speak with an Attorney If You’re in Trouble with the IRS

Of course, if you’re already in trouble with the Internal Revenue Service before we even get to tax season you’re going to need to sort things out. Filing another false or mistaken tax return could compound the issues you’re already having. Contact Robert V. Boeshaar, Attorney at Law. We help individuals and small businesses resolve their disputes with the IRS.