Happy Holiday Season!
We would love to tell you that good news in taxes is around the corner, but Not So Much! Here we are at the end of the year and Congress still hasn’t passed a budget. Try using that excuse with your landlord or mortgage company, “Sorry. I can’t send you a payment this month. I’m still working on my budget”. Yeah. I don’t think so. These past three years (Covid Years) sent government spending out of sight and Congress’ proposal is to leave the spending at current levels. Insane!
The IRS is still slated to hire those 87,000 new enforcement agents. Biden tells us that the focus is only on high income taxpayers, but IRS is the collection agency, and THEY say that taxpayers dealing in cybercurrency and self-employed businesses are the ones not paying their fair share. If you fall into one of those two categories, be warned – your chances of an audit have gone up A LOT!
There are no big changes for 2023. Here are some reminders of what you can do before January 1 to reduce 2023 taxes.
- 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.
- 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 2024, so check with your employer for details.
- Capital Gains – The Stock Market continues to be erratic, so now is a good time to review your winners and losers. 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 2023 tax return! NOTE: Bonus Depreciation dropped to 80% in 2023.
- Gifting – The annual gift tax limit for 2023 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 – The age for when you must begin withdrawing a Required Minimum Distribution has increased for 2023. If you already turned 72 before December 31, 2022, you must pay tax on an RMD of your IRAs and 401Ks. BUT, as of January 1, 2023, you don’t owe tax on a Required Minimum Distribution until you turn 73. That rule increases again to age 74 in 2024.
- 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.