2022 Tax Information
The Tax Deadline for 2022 Returns
The 2023 tax-filing season will open on Jan. 23, 2023—the day in which the IRS will begin accepting and processing 2022 tax year returns, the agency said on Thursday.
The tax due date is Tuesday, April 18th, instead of April 15th, because of the weekend and the District of Columbia’s Emancipation Day holiday, which falls on Monday, April 17th. By law, Washington, DC, holidays impact tax deadlines for everyone in the same way as federal holidays. Taxpayers requesting an extension will have until Monday, Oct. 16, to file.
Extensions to File for People Located in Disaster Areas
The IRS is allowing an extension to file returns for California residents and businesses due to the floods that have occurred there. The agency announced that taxpayers in any county covered by a federal emergency declaration would have until May 15th to file their income tax returns for 2022.
The relief will be offered automatically to anyone whose address on file at the IRS is in a disaster area—no need to ask for help or alert the agency that you’ll be filing late. If the IRS sends you a penalty notice anyway because you missed a deadline that should have been waived, the agency advises you to call the number on the notice to have the penalty erased. The delay to mid-May applies to everything that ordinarily would face deadlines of April 15th or earlier in 2023, including making tax-favored contributions to an IRA or a health savings account.
Electric Vehicles Energy Credits for Lease Vehicles
Leased vehicles will likely be able to qualify for new commercial electric vehicle tax credits without meeting stringent mineral and battery requirements or being built in North America, according to U.S. Treasury Department guidance released Thursday. It’s a victory for automakers like Rivian Automotive, Hyundai Motor and Kia Corp., as well as the South Korean government, all of which have urged the government to broadly interpret the definition of “commercial clean vehicles” in the recently passed Inflation Reduction Act to include leased cars, rental cars and cars used for ride share fleets such as Uber and Lyft.
Gifting Suggestions
Do you want to pass wealth to beneficiaries without any dire tax consequences? The easiest method is to give cash or property to your loved ones that qualifies for the annual gift tax exclusion. In most cases, you don’t even have to file a gift tax return! These gifts can be used to systematically reduce the size of your taxable estate, while enabling your family to realize income tax savings on future income. But there’s a downside: You must relinquish complete control over the assets you give away.
Under the annual gift tax exclusion, you can give gifts of cash or property to a recipient up to a specified amount without paying any federal gift tax. The annual exclusion, which is indexed for inflation in increments of $1,000, is increasing to $17,000 per recipient in 2023 from $16,000 in 2022.
In other words, you can gift the maximum amount to a sibling, child or grandchild, or several of these, in the same tax year with no gift tax problems. Furthermore, the annual exclusion is doubled for “split gifts” made by a married couple. (However, a gift tax return must be filed for split gifts.) By using the exclusion astutely from year to year, a married couple can easily transfer amounts valued well into six figures, all on a tax-free basis.
Social Security Cost of Living Increase
The Good News. Social Security beneficiaries are set to get the largest boost to their benefits in four decades. The 2023 cost-of-living adjustment, or COLA, will be 8.7%, the Social Security Administration announced Thursday. That’s about $140 more per month for beneficiaries. Although the changes will take effect in December 2022, beneficiaries won’t see the COLA increase until their first Social Security checks of the new year, the SSA says.
The adjustment comes following September’s Consumer Price Index Report, which determined that prices climbed 8.2% in the 12-month period that ended in September and 0.4% between August and September. The CPI was also announced Thursday.
Now for the Bad News. While millions will benefit from the increased COLA, there are concerns that the Social Security program will reach insolvency soon. Granting beneficiaries more funds now means less funds for future generations. According to a 2022 report from the Trustees of the Social Security and Medicare trust funds, the fund that pays retiree and survivor benefits will run out of reserves by 2034. After that, the fund will only be able to pay 77% of scheduled benefits.
Tax Preparers are Now Required to Have a WISP
The IRS now requires all tax preparers to have a Written Information Security Plan (WISP). A written information security plan is just one part of what tax professionals need to protect their clients and themselves. Given the rapidly evolving nature of threats, the IRS also strongly encourages tax professionals to consult with technical experts to help with security issues and safeguard their systems.
The Gramm-Leach-Bliley Act (GLBA) is a U.S. law that requires financial institutions to protect customer data. In its implementation of the GLBA, the Federal Trade Commission (FTC) issued the Safeguards Rule to outline measures that are required to be in place to keep customer data safe. One requirement of the Safeguards Rule is implementing a WISP.
Under the GLBA, tax and accounting professionals are considered financial institutions, regardless of size. Financial institutions subject to the Safeguards Rule include mortgage brokers, real estate appraisers, universities, nonbank lenders, and check cashing businesses.
As a part of the plan, the FTC requires each firm to:
Designate one or more employees to coordinate its information security program
Identify and assess the risks to customer information in each relevant area of the company’s operation, and evaluate the effectiveness of the current safeguards for controlling these risks
Design and implement a safeguards program, and regularly monitor and test it
Select service providers that can maintain appropriate safeguards by ensuring your contract requires them to maintain safeguards and oversee their handling of customer information
Evaluate and adjust the program considering relevant circumstances, including changes in the firm’s business or operations, or the results of security testing and monitoring
Amazingly, I have talked to other tax preparers who have not even heard of the WISP requirements. Hecht & Associates, P.C. has a WISP which is in place to help protect our clients’ information.
From Cloud backups and Cloud data storage to multiple on-site backups. Virus protection for our sever and each desktop computer. In addition, we have a robust Firewall which helps protect our clients.
You should ask your tax preparer if they have Written Information Security Plan (WISP). It is required that this plan be in place as of 12/31/22 although there is no verification by the IRS at this time. So, tax preparers still have time to implement their plan.