Click on a topic for more detail.
- Standard vs. Itemized Deduction
- Medical Expense Deduction
- State and Local Tax Deduction
- Home Office Procedure
- Don’t Rush to File
- Filing Extensions
- Get Your Refund Faster
- Amended Returns
- Charitable Contributions
- IRA Contributions
- IRA Required Minimum Distributions (RMD)
- State Returns
- Use Tax
Standard vs. Itemized Deduction: The Tax Cuts and Jobs Act (TCJA), passed in December 2017, made several significant changes to the individual income tax structure. These changes include a nearly doubled standard deduction and new limitations on itemized deductions. As a result of the TCJA, many more people are able to simplify their individual tax returns by claiming the standard deduction rather than itemizing deductions. For 2022 tax returns, the standard deductions are as follows:
- Single $12,950
- Head of Household $19,400
- Married Filing Jointly $25,900
- Married Filing Separately $12,950
- Additional Standard Deduction for Married Seniors and the Blind $1,400
- Additional Standard Deduction for Single Seniors and the Blind $1,750
Medical Expense Deduction: Medical expenses must at least 7.5% of Adjusted Gross Income to qualify as a deduction on Schedule A. This does not include Over the Counter (OTC) supplies but does include health insurance premiums paid by the taxpayer.
State and Local Tax Deduction: The deduction for state and local taxes (SALT) paid is now limited to $10,000. This includes amounts paid for real estate taxes and personal property taxes plus either state income taxes or general sales taxes, whichever is higher. If the total of SALT paid is greater than $10,000, only $10,000 is deductible on Schedule A.
Home Office Procedure: If you maintain a space in your home that is used regularly and exclusively as an office for your business, it is now easier than ever to claim a deduction for the use of that space. For up to 300 square feet, you may simply multiply the square footage of the office by $5 to come up with the deductible number. For many taxpayers, this will make the process easier, as they will not be required to document actual costs. There is some downside as well, so we will help you consider the best option for your individual situation. Also, be aware that this is for the Federal return. Many states still require a list of expenses to claim the home office deduction.
Don’t Rush to File: There are a number of factors that may delay the filing of your return.
- If you have investments for which you receive a 1099, be careful not to rush to file your returns. Investment companies often issue corrected 1099 forms showing dividends that were recharacterized after the original 1099 was issued.
- Taxpayers who receive K-1 reports from partnerships, trusts, and estates should also wait until they receive their K-1. The deadline for corporations to mail 2022 K-1 statements is March 15, 2023. If you file your returns before these documents are received, you may be required to file an amended return later, so it is better to be patient and get it right the first time.
- Many taxpayers are not aware of the fact that their investment portfolio may include holdings in partnerships that are required to issue a K-1. If you have investments, check with your broker or financial adviser to ascertain whether or not you should expect a K-1 report.
Filing Extensions: Taxpayers may choose to file for an extension allowing them to have until October 16, 2023 to file their 2022 tax returns. This may be a good idea if you have incomplete documentation that requires more time to gather, if you have life circumstances that make it difficult to file, if your tax situation is complicated in some way that requires the preparer to do more research in order to get it right, or if there are other unusual circumstances. Be aware that any anticipated amounts due must be paid with the extension request to avoid penalties.
Get Your Refund Faster: The best way to speed your refund is to file electronically (RWH Tax Preparation files all returns electronically at no extra charge unless an unusual circumstance prohibits electronic filing,) and to authorize direct deposit into a checking or savings account. Some tax return preparers offer bank products that allow their fees to be deducted from the anticipated refund and for the taxpayer to receive their refund immediately in the form of a debit card. RWH Tax Preparation does not offer this service, as the fees associated with this service for the taxpayer are excessively high. Using electronic filing and direct deposit, refunds take only a few days in most cases.
Amended Returns: You may amend tax returns for the previous three tax years. If you feel a mistake has been made in your returns for 2019, 2020, or 2021 bring them in, and we will review them for you. After April 15, 2023 you will not be able to amend your 2019 returns, so do not delay.
Charitable Contributions: All charitable contributions require proof documents. Proof documents may be official receipts from the organization receiving the contributions or canceled checks showing the contribution amounts. The IRS does not allow undocumented contributions such as cash placed into a church offering plate. If you do contribute cash offerings to your church, use their regular giving envelopes and insist on a statement of receipt. RWH Tax Preparation will not claim any charitable contribution for which there is no supporting document.
IRA Contributions: You may be able to decrease your tax liability by contributing to an IRA account. If you qualify, you have until April 18, 2023 to make contributions to an IRA for the 2022 tax year. If you are not sure if you qualify, contact us for individual guidance.
IRA Required Mininum Distributions (RMD): If you turned 72 in 2022, you are required to begin taking RMDs from your tax deferred retirement accounts. You must take the RMD by April 1st of the year following the year you reach the mandatory RMD age. In subsequent years, the RMD must be taken by December 31st.
Starting in 2023, the mandatory age for beginning RMDs will go up to 73.
In 2033 it will go up to age 75.
State Returns: The regulations for state tax returns vary greatly from state to state. In some circumstances, the taxpayer is not required to file a Federal return, but is required to file a state return. RWH Tax Preparation will assist you in determining if you are required to file a state return and will prepare and file the return for you if it is required.
Use Tax: Almost every state now requires reporting purchases made out of state and online for which sales tax was not paid. You should keep accurate records and receipts for all such purchases. If you are unable to document those purchases, the state will impose Use Tax based on a table that uses your income to determine the tax due. Failure to report those purchases and pay the tax due is considered tax fraud. Be aware that some companies are required to send state taxing agencies a report of your untaxed purchases. Those reports identify you by name and address. The report also lists the untaxed purchases. If you are unsure of the untaxed purchases you made last year, you may choose to pay tax based on your income level.