With the IRS discussing changes for the 2023 tax season, confusion has arisen about where small business owners stand in their tax bracket. We have compiled information from multiple sources, including the IRS, to help you navigate this upcoming tax season.
Are income taxes increasing in 2022?
When it comes to federal income tax rates and brackets, the tax rates themselves didn't change from 2021 to 2022. There are still seven tax rates in effect for the 2022 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
What deductions can I claim for 2022?
Car expenses, including fuel costs and maintenance.
Home computer and phone expenses.
Tools and equipment expenses.
Journals and trade magazines.
From the IRS:
October 20, 2022
WASHINGTON — The Internal Revenue Service today urged taxpayers to check their tax withholding while there's time left in 2022 to benefit from any necessary changes. (IR-2022-186).
An adjustment made now will help people avoid a big surprise, such as a big refund or a balance due, at tax time in 2023.
Life brings constant changes to individual financial situations. Events like marriage, divorce, new tax law, a new child or home purchase can all be reasons to adjust withholding.
October 24, 2022 — The Internal Revenue Service reminds taxpayers earning income from selling goods and/or providing services that they may receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party payment network transactions of more than $600 for the year. (IR-2022-189)
Tax Withholding Estimator
The Tax Withholding Estimator (see IRS.gov), which is available in English and Spanish, can help people determine if they have too much income tax withheld and how to make an adjustment to receive a return. In other cases, it can help taxpayers see that they should withhold more or make an estimated tax payment to avoid a tax bill when they file their tax return next year.
The tool offers workers, retirees, self-employed individuals and other taxpayers a user-friendly tool for effectively adjusting the amount of income tax they should have withheld from wages and pension payments based on their complete set of facts and circumstances.
Pay as you go
Taxes are generally paid throughout the year (salary withholding, quarterly estimated tax payments, or a combination of the two). However, about 70% of taxpayers withhold too much every year, typically resulting in a refund. The average refund in 2022 is just below $3,000.
A few other facts about refunds:
Taxpayers do not have to get one. Proper withholding adjustments help people boost take home pay rather than be over withheld and get it back as a tax refund.
While most are issued in 21 days or less from an error-free and paperless tax return, many take longer for different reasons.
Taxpayers are advised not to rely on a refund for big purchases.
Direct Deposit is the easiest and most convenient way to get a refund. More than 90% of all refunds are issued this way.
Paper return processing delays stemming from the pandemic are six months or more. The IRS COVID-19 operations page offers complete details.
Other items may affect 2022 taxes
Some unforeseen life events can be a trigger to make withholding adjustments. They include:
Coronavirus tax relief. Tax help for taxpayers, businesses, tax-exempt organizations and others – including health plans – affected by the coronavirus (COVID-19).
Disasters such as wildfires and hurricanes. Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location a major disaster area.
Job loss. IRS Publication 4128, Tax Impact of Job LossPDF explains how this unfortunate circumstance can create new tax issues.
For assistance with your 2022 tax preparation contact CBBS today at 603-541-7485 or schedule a free consultation, and we’ll be happy to help you navigate tax season successfully!