Although the Biden Administration wasn’t able to get the Build Back Better Bill through Congress (thank you! thank you!), there are some tax law changes in the Inflation Reduction Act. Most notable is a major increase to the IRS Budget including funding for 87,000 new IRS agents. That’s more new agents than most college football stadiums can seat! Their job will be primarily enforcement (no, their phone support isn’t likely to improve), so if you deal in cyber currency or your business has a lot of cash payments, you will be on their radar…
Meanwhile, the year-end approaches, so here are some reminders you may want to act on before January.
- Donations – If you still are itemizing: Clean out your closets and get those bags to Salvation Army or Goodwill. Buy/donate toys to Goodwill, Toys for Tots, Salvation Army, or another recognized charity. Write checks to the charities near your heart. Whatever you do, KEEP THE RECEIPTS! Charitable donations have become a favorite audit item at the IRS. For 2022, the $300 deduction of charitable cash contributions ($600 if Married) even if you don’t itemize is GONE. It may be back if Congress acts by the end of the year, but don’t count on it.
- Flex-Spending Accounts – USE IT OR LOSE IT! Although the rules have loosened a bit, you still have to use up most of the money set aside from your paycheck for child care or medical expenses by the end of the year. Some employer plans allow you to roll-over some of your unused FSA funds to 2023, so check with your employer for details.
- Capital Gains – With the stock market crashing this year, it’s a good time to review your portfolio and get rid of a few losers to offset profits on any winners you may have (I know, not many of those this year!). Remember that you are limited to a maximum of $3,000 of capital loss in any one year, so if you had a stock that lost you $5,000, you can claim only $3,000 this year and have to carry the balance to next year’s return unless you also had a winner or two to reduce the loss.
- Self Employed – Businesses can invest up to $1 million in new equipment and write it all off in the year the equipment was bought AND PUT INTO SERVICE, so if you are going to buy that new piece of machinery before December 31, make sure you put it to business use by December 31. If you buy it and it gets delivered on January 2, it won’t help you on your 2022 tax return! NOTE: You can write-off 100% as Bonus Depreciation in 2022. Bonus Depreciation drops to 80% in 2023.
- Gifting – The annual gift tax limit for 2022 is $16,000 per person. If you and her Mom gave your daughter a car for graduation last May, I hope it cost less than $32,000!
- Required Minimum Distributions – People over age 72 are normally required to take an RMD from their retirement accounts. You can instruct your broker to send all or part of your RMD to charities and avoid tax on what you donate. If you no longer itemize, this is a good way to make your charitable deductions.
- IRA Distributions – Remember, if you elected to spread the tax on a 2020 IRA distribution over 3 years, 1/3 of that distribution will be added to your 2022 income!
- Plug-In Electric Vehicles – There’s a significant federal (and often state) tax credit for buying certain plug-in electric vehicles as well as installing the charging station in your home, but you have to put the vehicle in service before Dec 31 if you want the credit in 2022.
You’re the Phish! Cyber crime, like all crime these days, is out of control. One of the most common tactics is phishing. That’s when you get an email (the hook) from what looks like a “trusted” source asking you to click on a link that takes you to what looks like a “trusted” website and you “voluntarily” give them your userid and password or other private info. I get phishing emails DAILY! NEVER click on an email link unless you are 100% certain it’s really from a “trusted” source, like me.
As always, please feel free to call or email us if you have any tax related questions before tax season.