Date: January 27, 2023
Updates to Know Before You File Your 2022 Taxes
With tax season upon us, there are a few changes this year that are important to be aware of. These changes come with an increased likelihood of getting a smaller refund or owing more on your tax bill. With many still feeling the effects of high inflation, it’s crucial to make sure you have a plan in place. Read below for highlights of the changes and what they can mean for you as a business owner.
1. Third Party Payment Apps – Many business owners utilize popular third-party payment apps such as PayPal, Venmo, and Cashapp. For those that do, your tax reporting requirements have changed! Previously, the IRS required reporting of payments that totaled $20,000 or more, or if you had 200 plus transactions. As of March 11th, 2021, the reporting requirements have changed to include any transaction exceeding $600 being reported to the IRS (regardless of how many transactions you have). Form 1099-K will be sent to you from each of the third-party payment platforms you have used (for $600 and up). As this change is for business transactions, if you receive the form in error for personal transactions, then you’ll want to contact the issuer. This means more forms to include on your taxes this year and is one of the many reasons it’s a good idea to hire an expert to make sure everything is accurate and filed in a timely manner. No one wants to open themselves up to an audit – and hiring someone will give you an extra layer of protection and peace of mind.
2. Expect less of a refund due to tax credit reductions – Due to the American Rescue plan of 2021, the increased tax credits offered last year will be dropping back to their previous amounts. One example is the child tax credit. Last year, the credit offered up to $3,600 for children under age 6, and $3,000 for ages 6-17, with the option to receive half of the payments in advance. Now the amount will go back to the previous $2,000 for children ages 17 and under. The child and dependent care tax credit will also be reverting to the original $3,000 (and $6,000 for multiple dependents). For 2021, this credit allowed up to $8,000 for one qualified dependent ($16,000 for multiple).
3. Be proactive by having a plan in place – With less credits this year, and a higher chance of having a larger tax bill than last year, many business owners have saving money on their minds. What is something you can do to ensure you aren’t overpaying, like so many unknowingly end up doing? With the complicated, ever changing tax code, it’s not only hard to keep up on the changes, but frustrating trying to translate the long-winded tax code into something easy to understand. Having a qualified tax strategist in your corner will ensure that have the help and guidance you need.
We are passionate about helping small business owners take advantage of the tax savings provisions available to them. Having a Tax Expert on your side will help reduce (or even eliminate) your tax bill, and make sure you are not one of many who end up overpaying on their taxes (every single year)! If you don’t have someone in your corner and are looking for guidance, we are happy to help. Contact one of our Tax Strategists here for a complimentary assessment.