2022 marked the final waning of most major COVID-19 disruptions, but its ripple effects still remain and will likely continue for years to come. Thankfully, the deluge of tax law and other regulatory releases has also much receded, though at least two notable federal tax laws were passed in 2022 with some potentially very helpful provisions. As we look ahead, the new funding for the IRS and slow return of governments to “normal” operations means good records and accurate tax preparation are as important, if not more, in the years ahead. The strategy for all this: (a) Have good finance systems to keep your records tidy over the course of the year, and (b) Use our team’s year-end checklists to confirm nothing got missed.
Below, we’ve also highlighted key tax tips for both businesses and individuals, plus at the end we’ve provided a collection of tax help tools like looking up your refund status, locating your online IRS Account, requesting a tax extension, and more.
Business Tax Tips 2022
- 100% business meal deduction — 2022 is the final tax year for the 100% deduction for business meals at a restaurant; In 2023, it will revert to the historical 50% deductibility. A related reminder: Entertainment costs such as sports tickets, concert venues, etc. are not deductible at all. (For more, see our post The Many Sides of Deducting Meals).
- Research & Experimental Expenditures — Effective in 2022, businesses can no longer elect to deduct “R&D” expenses in full in the year paid. Instead, the deduction has to be spread out over a five-year period (technical term, “amortized).
- Expansion of Small Employer Pension Plan tax credit — Effective in 2023, the tax credit available to small businesses with less than 50 employees for retirement plan startup costs doubles from 50% to 100%, plus an additional tax credit for qualifying employer contributions. If you haven’t already, this could be a good year for your business to setup a small business retirement plan.
- SEP plans for Domestic Employees — Effective in 2023, a household employer can setup a SEP retirement plan for their domestic employee (e.g., nanny).
- A host of additional Retirement Plan changes — A slew of tax provisions around retirement plans and savings were changed right at the end of the year. Things like expansion for part-time employees, inclusion of military spouses, waiving of discrimination rules as long as certain provisions are met, etc. So if you’ve run into roadblocks or limits in years past, it’s very possible those have somehow been changed — Reach out to our Tax Designers for your particular scenario.
Individual Tax Tips 2022
- Home energy efficiency credits are back & better — Effective for 2023, tax credits for energy efficient home improvements are expanded to $1,200 – $2,000 and include items such as windows, skylights, doors, heat pumps, water heaters, biolers, biomass stoves, insluation and more. And it’s now an annual limit instead of a lifetime limit (so if you’ve previously hit the lifetime limit, that’s now lifted).
- Clean vehicle credits are expanded but capped — Tax credits for electric vehicles used to disappear once the 200,000th unit of the approved car model was sold, but now that’s been replaced with a date-connected expiration starting in 2032. However, the ability to claim this credit can be eliminated based on your income or the cost of the vehicle, so it’s important to know your situation.
- RMD age going up again — The date when you’re required to begin withdrawing funds from tax-deferred retirement accounts already was recently increased from 70 1/2 to 72. But now it’s going to 73 starting in 2023 and then up again to 75 starting in 2033.
- Higher ‘catch-up’ limits — Many retirement plans have an expanded contribution limit for individuals aged 50 or older, with the theory to help them accelerate saving for retirement as they approach that date. Starting in 2025, there’s going to be an even further expanded catch-up contribution for those aged 60-63 at essentially 150% of the already existing catch-up.
- Emergency retirement plan withdrawals — Effective in 2024, you can make up to one $1,000 qualifying withdrawal from your retirement plan without incurring the otherwise applicable 10% penalty.
- Roll your 529 plan into a Roth — Effective in 2024, you can now perform a tax-free rollover of funds from a long-term 529 plan into Roth IRA with a $35,000 lifetime aggregate limit. This can be useful for yourself or to convert a 529 plan intended for your child or other beneficiary into a retirement savings account for them.
Helpful Checklists for Businesses & Individuals
When it comes to business finances and taxes, checklists are really the only way to be sure you’ve completed what’s needed and there’s not something missing which is going to cause you a problem down the road. Here’s our checklists honed over years that you can use to get yourself ready and trigger relevant topics to bring up during your tax interview:
- Year-end Business Book Closing Checklist — Following a strong year-end routine to close your books for the year means you won’t carry any costly number messes into 2023 and you’ll have optimized your figures for taxes for 2022. Download this checklist and run through before your business tax interview to avoid delays due to books that need to be cleaned up before anything can be done.
- Business Pre-Appointment Checklist — Business owners should be sure to scan through this checklist before your business tax interview to ensure you’ve gathered everything you should have at hand and to identify areas to bring up related to your activity for the year.
- Individual Pre-Appointment Checklist — Just like the business-equivalent checklist above, this checklist should be used for your personal return to address all the areas unique to individual sources of income, deductions, and more. There’s even a space for you to list out your questions at the end so nothing slips through the cracks and you can have a strong personal tax interview.
Useful Tax Tools for 2022
In addition to the checklists above, here’s a great compilation of useful tips for all things related to filing 2021 tax returns:
- Visit your IRS Online Account — Relatively new, the IRS has been expanding taxpayer’s ability to lookup their account history, access basic information like what advanced tax credits were received, and more. Activating and using your IRS Online Account can save what in the past would have involved a lot of paper shuffling and phone calling.
- Protect yourself from Identity Theft — Recently have your identity stolen? Or want to be proactive from someone fraudulently filing a tax return under your name and SSN? You can register with the IRS for an “IP PIN” (Identity Protection PIN) where they physically mail you each January a six-digit code that must be included with an e-filed return using your SSN in order to be accepted by the IRS.
- Check your refund status — Return already filed and wondering when to look out for your refund? Visit our Where’s My Refund? post for links to federal and state tax agency lookup pages and be sure to have your tax return on hand to fill-in the prompts.
- Pay your taxes online — Do you owe? We highly recommend you send your payment via the government agency’s website rather than try to mail a check (which can get easily lost, delayed processed, or mis-applied). Key online payment sites include IRS Direct Pay, Maryland individual, District of Columbia individual, Virginia individual, California individual, and Pennsylvania. (Related, here are the links for first quarter estimated payments.)
- Extend your tax return — All Support and Active Members will have their return extended for them automatically if needed, but other Member levels can still request our team extend your return for you for a nominal price. Alternatively, you can self-file your extensions following the guidance we provide in our Filing Tax Extensions post.
- Secure upload tax documents to your e-Cabinet — Before your tax interview, be sure to have securely uploaded copies of the tax documents you’ve gathered to your personal e-Cabinet to avoid a delayed start or the need to reschedule your tax interview.
- Cut-off dates — February 22 is the cut-off for the last piece of information to complete S-corp and Partnership returns due on March 15. March 24 is the cut-off for Individual and C-corp returns due April 15. And April 28 is the cut-off for Exempt Organization returns due May 15.
- Up-to-the-minute developments — Any major tax legislation or procedure changes are shared in real-time on our Twitter feed, so if you catch wind that something seems to be going on, or just want to see a rundown of tax developments happening mid-stream, be sure to scroll through our Twitter feed for the latest. (We’ll also post about large legislation changes on our blog should they happen.)
Our Philosophy: Good Tax Design is Simple & Money-Saving
In our approach, achieving an Optimized Tax for entrepreneurs starts with a smart tax plan, continues with a mid-year tax projection, and culminates with collecting the issued forms and finalizing the numbers we’re already expected, no surprises.
With a good tax design and simple habits, tax day becomes a non-event and saves you and your business money. If you’d like to experience an Optimized Tax too, just reach out to setup your personal Coffee Conversation with our team.