Tax Code Changes for The 2023 Filing Season

The tax relief professionals at Anderson Bradshaw thought it helpful to provide, in plain English, the code changes for 2023 as opposed to your navigating the IRS website. This blog aims to set out the changes and essential points for consideration as you prepare for the upcoming season.

Form 1099-K

In 2022, taxpayers who received payments from third-party networks, like PayPal, Venmo, and Square, that exceeded $600 will be issued a 1099-K from these third-party networks. Typically, these payments are for goods and services the taxpayer provided to their customers.

In prior years, third-party networks issued 1099-Ks only to those taxpayerswith more than 200 transactions exceeding $20,000. The American Rescue Plan Act of 2021 (ARPA) lowered the threshold to $600 regardless of the number of transactions. Therefore, a taxpayer with one transaction in the amount of $601 will be issued a 1099-K if the payment was processed through a third-party network.

However, if a third-party payment network processed a payment from a relative or a friend as a personal gift or an expense reimbursement, then these transactions remain non-taxable even if a 1099-K is issued.

This change will result in more 1099-Ks being issued to taxpayers for reporting to the IRS. Even if the transaction is not taxable, the 1099-K must be reported on the tax return.

Tax Credits

Some tax credits granted under ASPA will be returning to 2019 levels. Due to the changes in the Child Tax Credit (CTC), Earned Income Credit (EIC), and the Child and Dependent Care Credit, many taxpayers will see significantly smaller refunds this season.

The impacted credits are:

• CTC has been lowered to $2,000/child from the $3,600/child received in 2021,
• EIC has been lowered to $500 for taxpayers who received $1,500 in 2021, and
• Child and Dependent Care Credit returns to the $2,100 maximum instead of the $8,100 maximum in 2021.

Tax credits are a dollar-for-dollar reduction in tax liability, meaning the amount of income tax owed. The ASPA resulted in many taxpayers receiving higher-than-usual refunds in 2021. This will not be the case for 2022.

Charitable Deductions

Although not a credit, taxpayers in 2021 could have taken an above-the-line deduction of up to $600 for cash donations to qualified charities. This deduction reduced the amount of income subject to tax.

For 2022, this deduction has been rescinded and is no longer available. Only taxpayers who itemize, meaning completing a Schedule A, can deduct charitable donations of cash and property.

This change will increase the amount of taxable income.

Premium Tax Credit (PTC)

The PTC helps eligible families and individuals cover the premiums for health insurance purchased through the marketplace, another name for ObamaCare. The eligibility requirements were expanded in 2021, and the credits remained in place in 2022.

This expansion will make credit available for more families and individuals in the 2023 season.

Tax Credit for Clean Vehicles

Under the Inflation Reduction Act of 2022, the availability of tax credits for purchasing electric cars changed significantly. Now, the tax credit is only available for certain vehicles purchased after August 16, 2022 and assembled in North America.

It is important to know that the vehicles listed by the Department of Energy as qualified for the tax credit may not meet the assembly requirement.

The tax professionals at Anderson Bradshaw realize that not all changes for the 2023 tax season have been effectively communicated to taxpayers. We hope this blog has prepared you for the unexpected conversations that may come up.

Do You Need Guidance and Advice for the Upcoming Tax Season? Please Contact the Reputable Anderson Bradshaw Tax Consulting Today

The tax relief consultants at Anderson Bradshaw Tax Consulting can help with any tax situation. With over 30 years of experience in the industry, we have seen almost every tax issue and have learned the best ways to handle each situation. You can feel confident knowing your struggles and difficulties with the IRS can be resolved and corrected quickly and efficiently. For further information or to schedule a consultation, please get in touch with Anderson Bradshaw at 877-550-3911 or visit www.AndersonBradshawTax.com to learn more.