12/15/2022
TIPS for Clients for the Upcoming Tax Season!
1. More taxpayers will be receiving Form 1099-K
This change is effective Jan. 1, 2022. All third-party payment platforms are required to issue Forms 1099-K when payments to merchants for goods and services exceed $600.
What is reported on a 1099-K?
If you accepted $600 or more in 2022:
by payment cards for good and services, you will receive one Form 1099-K for the total amount of the payments from each payment card.
from a third-party payment app, you will receive one Form 1099-K from that organization for the total amount.
When will I get the 1099-K and what should I do with it?
2022 Forms 1099-K must be furnished to the payee by January 31, 2023. Use this information return with your other tax records to determine your correct tax.
What is not reported on a 1099-K?
Money received as a gift or reimbursement of a share of a meal or rent should not be reported on a 1099-K. Payments should indicate whether they are personal to family and friends or a business transaction for goods and services.
What if the information is wrong?
If the information is incorrect on the 1099-K, contact the payer immediately, whose name appears in the upper left corner on the form. Keep a copy of all correspondence with the payer with your records. If you cannot get the form corrected, you may attach an explanation of the error to your tax return and report your income correctly.
The IRS cannot correct inaccurate Forms 1099-K.
2. 2022 changes that may affect your tax refund
Changes in the number of dependents, employment or self-employment income and divorce, among other factors, may affect your tax-filing status and refund for 2023.
No additional stimulus payments.
Unlike 2020 and 2021, there were no new stimulus payments for 2022 so taxpayers should not expect to get an additional payment in their 2023 tax refund.
Some tax credits return to 2019 levels.
Several tax credits, including the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC) and the Dependent Care Credit will revert to pre-COVID levels. This means that taxpayers will likely receive a significantly smaller refund compared with the previous tax year. For a comparison, those who got $3,600 per dependent in 2021 for the CTC will get $2,000 for the 2022 tax year. Similarly, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022. And the Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021. Visit Credits and Deductions for more details.
No above-the-line charitable deductions.
During COVID, taxpayers were able to take up to a $600 charitable donation tax deduction on their tax returns. However, in 2022, this deduction will return to pre-COVID rules, which will not allow those who take a standard deduction to make an above-the-line deduction for charitable donations.
More people may be eligible for the Premium Tax Credit.
For tax year 2022, taxpayers may qualify for temporarily expanded eligibility for the premium tax credit. Remember that simply meeting the income requirements does not mean you're eligible for the premium tax credit. You must also meet the other eligibility criteria.
3. Avoid refund delays and understand refund timing
Get refunds fast with Direct Deposit
Taxpayers should prepare to file electronically and choose Direct Deposit for their tax refund – it’s the fastest and safest way to file and get a refund. Even when filing a paper return, choosing a direct deposit refund can save time. For those who do not have a bank account, the FDIC website offers information to help people open an account online.
The Inflation Reduction Act of 2022 changes the eligibility rules to claim a tax credit for clean vehicles. More details about clean vehicles will be available in coming months.
Many different factors can affect the timing of your refund after we receive your return. Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills.
Identity Theft and refund fraud.
Some returns may require additional review and may take longer. The IRS, along with its partners in the tax industry, continue to strengthen security reviews to help protect against identity theft and refund fraud.
IRS cannot issue EITC and ACTC refunds before mid-February. Refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) can't be issued before mid-February. The law requires the IRS to hold the entire refund − even the portion not associated with EITC or ACTC.
Returns requiring manual review.
Some returns, filed electronically or on paper, may need manual review delaying the processing if our systems detect a possible error, the return is missing information, or there is suspected identity theft or fraud. Some of these situations require us to correspond with taxpayers, but some do not. This work does require special handling by an IRS employee so, in these instances, it may take the IRS more than the normal 21 days to issue any related refund. In those cases where IRS is able to correct the return without corresponding, the IRS will send an explanation to the taxpayer.
