Some tax changes to be aware of

It's been an interesting year with important tax changes that will impact you. Here are some of the changes and issues you need to know about.

Tax return due dates:

• Individuals must file returns by April 18, 2023, for the 2022 tax year.

• Partnerships must file returns by the 15th day of the third month following the close of the taxable year (March 15 for calendar-year taxpayers);

• C corporation returns are generally due by the 15th day of the fourth month following the close of the taxable year (April 15 for calendar-year taxpayers);

• S corporation returns will remain due by the 15th day of the third month of the taxable year (March 15 for calendar-year taxpayers); and

• W-2s and 1099s must be filed by January 31, 2023, for the 2022 tax year.

Inflation Reduction Act: The Inflation Reduction Act was passed into law late last summer and contained numerous green energy credit provisions, including extended credits for clean energy vehicles (new and used) and energy-efficient home improvements. However, there are many more limitations for these credits, including income limitations and manufacturer's suggested retail price (MSRP) limitations in the case of the Clean Vehicle Credit.

Be sure to consult a tax professional before making any purchase where a salesperson asserts that you are eligible for a tax credit. It's very possible that your individual income tax situation, of which the salesperson has no knowledge, will limit your credit.

Virtual Currencies: The IRS has ramped up its enforcement of virtual currencies such as Bitcoin. Most taxpayers who own virtual currencies fail to report their taxable transactions when filing their tax returns. The IRS is sending letters to taxpayers with known virtual currencies accounts. The IRS requires taxpayers to affirmatively declare whether they are engaged in any virtual transactions. Intentionally failing to report taxable income can have severe consequences.

1099s and K-1s: If you received 1099s or K-1s from investments in 2022, you may extend your return in case these documents are corrected after the original filing deadline. We are seeing increasing numbers of corrected information returns, which require taxpayers to amend their original tax returns to reflect the corrected amounts. In some cases, the amounts are vastly different and can create additional costs in amending the tax returns and potential penalty problems.

1099-Ks: The filing threshold for 1099-Ks has dropped to $600 for 2022. If you receive income through a third-party settlement provider (such as a credit card company or even a mobile phone app like Venmo or Apple Pay, among many others) then you may receive a 1099-K for that income even if you haven't in the past.

In the case of mobile phone payment apps, if you designated your account as a business account, but receive payments for non-business items, then you may receive a 1099-K for income that should not be taxable to you. Do not ignore the 1099-K. The IRS will expect you to report the income.

Large inflation adjustments: Inflation was at its highest point in decades in 2022, which resulted in large inflation adjustments for the 2023 tax year for tax rate brackets, deductions, annual gift tax limitations, Social Security benefits and retirement contribution limitations, just to name a few.

Foreign accounts: You must report overseas assets owned by businesses as well as individuals. So, the reporting requirements are increasing and the penalties for failure to report continue to be harsh. Not all foreign holdings must be reported. If, for example, you hold stock in a foreign company through a U.S. broker, those holdings do not have to be separately reported. However, if you hold any other types of foreign assets, including bank accounts and securities accounts, you will need to discuss the situation with your tax professional. If you have any doubt as to whether any of your assets are foreign, please discuss those assets with your tax professional.

Talk to the professionals at Moats & Hebebrand CPAs at 20231 Valley Blvd., Ste. E or call (661) 822-1750.