Tax Changes & Updates for 2022 & 2023
Recent changes to the tax code could impact your 2022 filing. Schedule your in-person or virtual tax preparation appointment with us to get the largest return possible.
There have been a number of updates that may impact your tax filing for 2022. Be sure to read the important details below and then reach out to our tax experts to discuss how these updates may affect you directly. We are now scheduling in-person and virtual tax preparation meetings. You can also drop off/upload your documents to our portal for us to complete when time permits. Please call our office to discuss what works best for you. Check out our Tax Guides to help prepare for your tax preparation.
Stimulus
There were no additional federal stimulus payments, so you WILL NOT receive any letters from the IRS like you did last year.
Advance Child Tax Credit Payments
The advanced child tax credit was only for 2021, so you did not receive any in 2022 and WILL NOT receive any letters from the IRS like you did last year.
Charitable contributions
In 2021 You could deduct monetary charitable contributions (not clothing) up to $300 per person, even if you did not itemize deductions. This has been eliminated. You must itemize your deductions in order to deduct and charity in 2022.
Dependent Care Credit - Also called the Daycare credit
The maximum expense for 2022 was reduced back down to $3,000 per child and $6,000 for two or more children. Please make sure that you have all of the daycare providers information. We will need name, address, tax identification number, and $ amount. Daycare can include preschool and even day camps. For example, it can include sports camps, horseback riding camps, etc. It cannot include any overnight camps.
Business Meals (for people with businesses)
For 2022, you can deduct 100% of the cost of a business meal that was purchased from a restaurant. A restaurant is a business that prepares and sells food or beverages to retail customers for immediate consumption. A restaurant does not include a business that primarily sells pre-packaged food or beverages not for immediate consumption, such as a grocery or convenience store. The meal does not have to be consumed in the establishment, so “carry out” and even delivery counts. This deduction used to be limited to 50%. The 50% limit still applies to meals that were not provided by a restaurant. For example, if you pick up a couple of sandwiches at Wawa or the grocery store to bring to the office or job site for your staff, that would be limited to 50%. Yes, this is a very tough distinction…donuts from Wawa 50%...donuts from Dunkin 100%. You need to be able to provide me 2 numbers when we are working on your return.
Business Miles (for people with businesses)
For those of you that are able to deduct miles on their tax returns (small business / contractors), you will need to provide us with 3 mileage numbers for 2022 (for each vehicle used in business).
- The total miles you put on your vehicle for 2022. This is every single mile driven this year.
- The total business miles put on the vehicle from January 1 through June 30, 2022.
- The total business miles put on the vehicle from July 1 through December 31, 2022.
This is because the standard mile rate for the first half the year was 58.5 cents and it was increased to 62.5 cents on July 1.
Real Estate Taxes / SALT tax
As many of you are aware, there was a $10,000 cap imposed on the deduction for State and Local Taxes (SALT), in 2018. This is the section on the itemized deductions that included your real estate taxes, the income taxes you paid to the state(s), and the income taxes you paid to your local jurisdiction (through Berkheimer or Keystone Collections). This coupled with the higher standard deductions, forced many people to take the standard deduction. THIS HAS NOT CHANGED!
Energy Efficient Home Improvement Credit
The credits for energy efficient improvements to your home were extended through 2022. For 2023 those credit are slightly improved. For improvements in 2022 there was a lifetime credit amount. In other words once you claimed this anytime after 2005, you could not claim it again. Beginning in 2023, they eliminated the lifetime limit. The limit is now applied each year. These credits are for energy efficient exterior doors, windows, skylights, insulation, heat pumps, central air conditioners, water heaters, furnaces, hot water boilers and biomass stoves. You should bring in your receipts if you had any of these items installed. You should also confirm with the manufacturer that the item meets the energy efficient requirements of the IRS.
Residential Clean Energy Credit
The credit for solar panels, solar water heating, wind turbines, geothermal heating, fuel cell property, and biomass fuel property has been increased. Under the Tax Cuts and Jobs act the credit for was set at 26% for 2019 through 2022 and then 22% for 2023 and 2024, it has now been raised back to 30% for property placed in service from January 2022 through December 2032 (that is not a typo, its a 10 year period). The % is then set to decrease in the years following 2032, but lets be honest, there will be a few more presidents and congress people in office before we get to that point, so it is likely to change. Qualified property now includes items installed on any of our residences. It was previously limited to your primary residence, but this is now available for your 2nd (or 3rd) residences!
Electric Vehicle Credits
So here is where things get really complicated. For Vehicles purchased before 8/17/2022, the credit follows the "old" rules with regards to phase outs when a manufacturer sells more than 200,000 electric vehicles in the US. For vehicles purchased from 8/17 through 12/31/22, those same rules apply AND the vehicle must undergo final assembly in North America.
Click for more information.
For Vehicles purchased in 2023 and after, the rules are even more confusing. The 200,000 vehicle limit is removed, but they added requirements for final assembly in North America, minimum battery capacity, limits on manufacturer suggested retail price, and even gross income limits for the taxpayer. However, at the time of purchase, you can elect to transfer the credit to the dealership in exchange for a price reduction on the vehicle. The dealer will be able to claim the credit from the IRS. This gives you a couple of advantages. One advantage is that you realize the savings at time of purchase, not months later when you file your tax return. The second advantage is that it reduces the amount you finance, which could save you more money in the long run by not paying finance charges on that amount. The third advantage is that you don't have to worry about the gross income limits that would affect the credit on the tax return.
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Home Office
Under the current law, as of the time of this writing, there is NO DEDUCTION for home office for taxpayers that are employees. For taxpayers that have their own business or are working as independent contractors, they still have the ability to deduct home office expenses.
Employees are also not permitted to deduct any expenses that their employers did not reimburse them for. You cannot deduct office supplies, travel, cell phone, printers, ink, cables, etc.
Union Dues (for PA residents)
Just a reminder that union dues are still deductible on the Pennsylvania state tax return. In order to make the deduction, PA requires that support be attached to the tax return. This support can be a copy of a statement from the union hall (preferred) or a copy of the last paystub of the year (from each employer if more than one) that clearly identifies the year-to-date union dues. Please make sure you have this at the time of your appointment. If needed, you can have the union hall fax the statements to us at 610-627-0932.
Parents of College Students
Many parents of college student are unaware that there are education tax credits that can be claimed on their tax return. These credits could be worth up to $2,500. Your college student will receive a form 1098-T from the college. While this form is in the name and social security number of the student, it is most often reported on the parents' tax return where it will generate the biggest credit. Most schools make them available on the student portal for the students to print out.
While we would prefer to prepare your college student's tax return (in order to run the numbers and maximize the tax credit), we understand that your college "kids" are now "adults" and may want to take responsibility in handling their own taxes. In that case, please tell your student not to file their return until we have determined if you will be claiming them.
Top Five Bookkeeping Mistakes Made by Small Businesses
Starting your own business is an exciting endeavor. You're working hard to get things off the ground and putting the right systems in place to ensure your company's success. Unfortunately, this is also the time that bad bookkeeping habits start to take hold that in the long run, can cost you time, money, and unnecessary stress. Making sure your bookkeeping is set up the right way is crucial to ensuring your company's future success. Being aware of common pitfalls to avoid helps you better navigate your finances and protect your business for the long-term.
Here are top bookkeeping mistakes made by small businesses:
Failing to track reimbursable expenses.
Neglecting to keep track of your reimbursable expenses is simply leaving money on the table. You may very well be missing out on deductions that directly impact your bottom line. It's important to create a system that allows you to track expenses as you go along otherwise, it will most likely get pushed back to the last minute and eligible reimbursements may get missed.
Recording large ticket items as immediate expenses instead of assets.
Choosing to expense an item rather than depreciate it as an asset may help your immediate cash flow but it might also prevent you from receiving a more valuable benefit down the road. Expensing it right away means you won't be able to expense it later when your profits most likely have increased and you're paying a higher tax rate on your income. It's important to make a decision that takes future expectations into account.
Sole proprietors putting themselves on the payroll.
Small business owners have personal expenses just like everyone else but that doesn't necessarily mean they receive a company paycheck. Depending on how your business is set up, putting yourself on the payroll may be illegal. The IRS has specific rules on how you should pay yourself based on the structure of your business. It is important that your bookkeeping is set up the right way to make sure your payment procedures are in line with the law.
Not backing up your data.
Technology saves us both time and money but in the case of an IRS audit, it could be a liability if you're financial systems are not set up correctly. It is important to have an effective organizational system in place so you can access information quickly and avoid a major disruption in the case of a technological compromise or mishap.
Not giving your bookkeeping the attention it deserves.
Your main role as a business owner is to oversee your company's core business. When it comes to bookkeeping, even including setting up your QuickBooks, you should be working with an experienced professional who has the training and knowledge to keep your business's financial health in check while you focus on managing your company's overall performance.
Set your business up for success by learning how we can maximize your bookkeeping services. Call us at 610-565-8009 or fill out our contact form.
Learn about how our Bookkeeping Services can help your business.