December 31, 2022 will be here soon. Here are a few reminders to consider as we approach the end of the year.
Forms 1099 must be filed every year by businesses or by individuals who conduct business activities (including farming and rentals if you are real estate professional), and make payments for rent or for services. If you answer “Yes” to the questions below, you may have to file a 1099:
- Do you rent your business location?
- Do you hire individuals who are not employees to provide services to your business?
- Do you engage the services of an accounting and/or a legal firm?
1099s must be submitted by January 31 and must be filed electronically. If you don’t have a completed W-9 from all your vendors, now is the time to request. To avoid punitive penalties, file the 1099s on a timely basis.
Changes for 2022:
- You can no longer deduct $300 for charitable contributions or up to $600 if your filing status is married filing joint, even if you do not itemize. This was a special deduction available to taxpayers under the CARES Act that expires after the 2021 tax year.
- Ensure that you requested the Required Minimum Distributions (RMD) from IRA and other retirement accounts.
- If you have received a settlement payment from PG&E for loss incurred in the California Wildfires, there are differing tax impacts for the payments received. California recently passed CA AB1249 making the payments not taxable for California. Payments still may be taxable for Federal income tax.
- If you are owner of a small business and if you or your business made a “PTE” payment by the June 15, 2022 due date, you may make the election on your 2022 tax returns. It may benefit you to make the second PTE payment by December 31 instead of the March 15, 2023 due date. Eligible owners of pass-through entities (partnerships, S-Corporations and LLCs taxed either as a partnership or an S-Corporation) may make an election to pay a 9.3% tax on their share of the income by the pass-through entity. The benefit to the owner is that the California tax paid on the pass-through income is not subject to the federal limitations of state and local taxes, and it will reduce federal Adjusted Gross Income. If you did not make the election for 2022, you may consider making the election for 2023 (first payment is due by June 15, 2023).
The Inflation Reduction Act
The Inflation Reduction Act (IRA) was passed on August 12, 2022. It contains several energy incentives, including:
- Expanded electric vehicle tax credits up to $7,500 for new electric vehicles or $4,000 for used electric vehicles purchased through 2033. The manufacturer limit is removed for vehicles purchased in 2022 and later.
- The credits for energy efficient homes and improvements are extended and expanded up to $5,000. The $500 lifetime limit for home energy efficient improvements is removed.
- The solar credit is increased to 30% of eligible costs for qualifying energy systems placed in service from 2022 to 2032.
- The amount of research credit that may be applied to a business’s payroll tax liability is increased from $250,000 to $500,000 starting in 2023.
- Clean energy credits are extended and expanded for businesses to increase domestic production and sale of components used in wind, solar, fuel cell, hydropower, and waste energy.
There are many other changes and provisions in the IRA, including new energy credits. Feel free to reach out to us to see how you or your business may benefit from energy incentives.
Other year-end questions and reminders:
- If you own a business, is it time to purchase new equipment? Equipment must be received, installed and in use by December 31, 2022 to take advantage of 100% depreciation. Equipment purchases placed in service January 1, 2023 or later are eligible for a maximum 80% bonus depreciation deduction.
- Have you considered making gifts? For 2022, the exclusion is $15,000 per donee. If you have been considering making a gift to a child, grandchild, or anyone else, you can do so until December 31.
- Should you consider a charitable contribution made directly from your IRAs? With the new tax law, this may be an alternative to help reduce your tax liability, as the donation can satisfy your required minimum distribution and is not subject to income tax.
- Have you made any changes in employment such as becoming part of the GIG economy as an UBER driver or delivering for Door Dash? If so, you may need to make estimated payments. Please call us to help calculate 2022 estimated tax payments due.
- As of 12/31/2022, reporting requirements for a 1099-K has changed. If you received payments of $600 or more from a credit card company or electronic payment processor, you will receive a 2022 1099-K. Income is reported on various schedules on your tax returns. Include copies of the 1099-Ks with all your tax documents provided to prepare your tax returns to ensure proper recording of all your income.
Questions about your 2022 income and how tax laws may affect you? Please give us a call.