 Internal Revisors are as tax news tax time guide things to consider when filing a 2022 tax return Tax time is a good time for contemplation questions naturally arising such as When in the world did this get so dang complicated? What why do they need to know that? Holy crap. Is the government actually spying on me? And here I was thinking I had to worry about like Chinese spy balloons and tiktok spying on me Honestly, hey the government's worse than those punk kids with their cell phones Always sticking the camera in your face and then they're like, why is it upset you bro? It's just a video. Why does it bother you man? Say the irs does like the same thing. They're like, yeah, we're tracking every transaction You make over 600 dollars talking to your customers enforcing them to give us documentation on your business transactions Why is it? Why is it upset you bro? Why does it bother you, man? We're just tracking everywhere. You spend your money every penny that goes somewhere. We're just seeing where it goes Why is it bother you? And by the way, I'm telling you Like like handing kids cell phones to walk around with these days Is worse than like school teachers handing out like nun chucks for kids to be like walking around with I mean, it's ridiculous. Hey, hey, phil get get that cell phone camera out of my face phil Get that camera. You know, I don't do video on this podcast You know, I don't do video why why because I care. I care because I care. That's why I care Okay, phil I swear I swear phil I'm gonna take that cell phone and throw it right out the window. I'm telling you Oh great. Oh great Now Phil's posting a video to tick tock labeled toxic male aggression gone wild You see you see the This is exactly what I'm talking about Honestly phil that can't be good for business marketing strategy. I mean, it's clearly not lined up to our mission statement phil No, I see phil you don't care Mission statements don't matter. It's all about the cause All about the cut honestly feel like I'm still dealing with the fallout of the last time you put the crazy mob hit on my head For playing that new harry potter video game But whatever Yes, phil i'm still playing the harry potter video game. It's great. Holy crap Put down the knife phil put down the knife. It's just a game. Oh, no Phil has gone crazy What kind of spell would harry potter use in this situation? I know ridiculous ridiculous Oh crap. It's not working Possibly because phil already looks ridiculous. I know Unridiculous Unridiculous It's not working. I should have studied my magic more help her. My any help IR 2023-32 february 22nd 2023 washington with the 2023 tax filing season in full swing the internal revenue service Reminds taxpayers to gather their necessary information and visit irs.gov irs.gov For updated resources and tools There's a link to those here to help with their 2022 tax return This news release is part of a series called the tax time guide. There's a link to that A resource to help taxpayers file an accurate tax return Additional guidance is available in publication 17 your federal income tax for individuals Things to consider before filing taxpayers should wait to file until they receive all their proper documents There's a link to that here or they risk making a mistake. They could cause delays So obviously for more basic tax returns Most of it will be document driven such as the w2s and the 1099s and so on and as we know The government also is going to receive those forms. That's the point so when they are the idea of the tax code it's an income tax system And that means income is kind of bad for taxes The government has an incentive to try to double check your income The way they often do that is to put the pressure where they have the leverage in a business transaction Where one side is paying therefore has a deduction or expense the other side has income They have the leverage on the person that is paying So generally they go to the person paying in a business transaction and force them to give documentation Not only to you but to the irs in the form of w2s and 1099s And might also force them to have withholdings as well Therefore if you put something on your tax return that doesn't line up with the documentation provided to the government It doesn't take them like an audit or any real Effort to see that it doesn't line up to the documentation that they got you'll almost surely have a delay And whatnot going forward therefore You want to make sure that you have the documentation you need in order to file a proper return If you're looking to get your refund as fast as possible You also want to be careful when you get some forms like a 1099s from like Your investments and stuff like that sometimes they they say on it That it's going to be like this is a a preliminary estimate that might be subject to change or something like that Which means it's probably going to change, you know So you might want to wait and make sure that you've got the final documentation for any kind of investment statements Before filing as well because obviously on the payer side the people issuing the 1099s and the w2s They have deadlines so they're trying to get those things out You know on time before the deadline so that they don't get hit with penalties and interest So they should also review their documents carefully if any of the information is inaccurate or missing tax payers should contact the payer Right away for a correction or to ensure the issuer has their current mailing or email address So if the documentation is wrong and someone gives you a 1099 that's inaccurate Then the problem is the government has that as well So if you try to file a tax return that is accurate, but that is not in the same number as I was on the 1099 Then it's likely that the irs is going to going to question it now You might have to do that But but you want to first try to get the correction happening by going to the issuer of the 1099 You can't do it from the irs's side because they're just they're not the one issuing So they're going to it'll take a longer of a process to do that You're going to try to first fix it on the issuer side and say hey you messed up. You gave me a 1099. That's wrong You jerk. It's really causing me problems. Would you please? Fix it because the irs thinks I have this income It's causing me problems, right? That's so Don't call them a jerk because that might make it that might Complicate things, but you know what I mean because it could kind of cause problems Created an irs online account. There's a link to that here can help taxpayers secure access information about their federal tax account Including payments tax records and more so you want to set up that online account I would think would be coming more and more relevant going forward in the future given the fact that they're trying to update their online access and be electronic and whatnot and try to get to where other business Organizations are at banks being quite Good with their online resources and tools still highly a lot better than the irs in my opinion Organized tax records make preparing complete and accurate tax returns easier and may help taxpayers find an overlooked deduction or credit So obviously if you have your taxes All the documents scattered all over The floor it might be a little bit more difficult than if you kind of organize and maybe if they're on the floor But you like put them in in stacks that you know how you know how they're lined up on the floor instead of just like randomly Then that's the kind of organ but in the case taxpayers with an individual taxpayer identification number or iten There's a link to that here may need to renew it If it's expired and is needed on a us federal tax return If they don't renew an expiring or expired iten the irs can still accept their return But it may delay processing or credits owed So you want to have the updated ID number because you are a number to the irs and you have to know what that number is Now if you if you have an old number then the iris would still like you to file rather than not be in compliance You would think that would be how the structure would be set up But then of course it could have caused a delay because the number is not current changes to credits and deductions for tax year 2022 unlike 2020 and 2021 There were no new stimulus payments for 2020 So taxpayers should not expect to get an additional payment in their 2023 tax refund so The stimulus payments that went out were like those those payments that they just kind of went out during kovid and those were linked to the 2020 and 2021 tax returns now if those stimulus payments went Correctly and everything worked out then you didn't really have to do anything on your taxes but if there was a problem with them then you had to To uh recover that problem or correct it with the recovery rebate credit We don't have any of that stuff in 2022 And therefore it should be easier in that case because we don't have to that whole stimulus thing going on Although we do have other kind of prepayments that they've been messing around with Which is the prepayment for like the prepaid insurance for the healthcare marketplace kind of situation and uh, and what's the main one any case however Taxpayers may still qualify for temporarily Expanded eligibility of the premium tax credit a refundable credit that helps eligible individuals and families cover the premiums for their health insurance Purchased through the health uh insurance marketplace So that's the one I was talking about to get this credit taxpayers must meet certain requirements and file a tax return With form eight nine six two premium tax credit. So they've been experimenting with these kind of strategies They did it with the child tax credit last year and whatnot where they try to give an advanced payment And then try to estimate what the actual credit will be given it out in advance So they still do that with the premium tax credit Obviously the idea is that they're trying to get the money out there faster But it also that makes it a lot more complex right because now people tend to not really understand what's happening with these uh with the with the Payments that they're making for their health insurance Because they they they actually go and get the payment calculation for how much they owe for insurance And it's it's hard to kind of connect the fact that that the premium was reduced by the credit that was estimated to happen And so you actually it's kind of like you got a payment and then you pay down The premium with the payment that you got from the government for a credit that was given But it kind of looks like you're just paying The whatever the premium is that happens to be a lot lower Than other than other premiums right so that it actually kind of complicates The you know the thought process of what people are doing and then at the end of the year You have to kind of figure out how much you've got from the premium credit actually calculate the credit Compare the two see if you got an overpayment of the credit or underpayment And see if you still get a benefit when you file the tax returns or if you actually owe some money because you got overpaid on it They also did some funny things in prior years as well where they kind of waived I believe they waived if you if you got overpayment of the credit And they kind of waived it which again is some weird It's kind of a weird incentive because that would incentivize people To try to lie about the credit or or at least overestimate Their how low their income is going to be so they get a bigger credit which is a prepayment and then Get their insurance lowered by more and then hope that the government just waives the fact That you you didn't have as big a credit as anyways So it's kind of complicated also eligibility rules change to claim a clean vehicle credit under the inflation reduction acts We've been talking about the inflation reduction act a lot nothing with regards to inflation reduction or anything But you know all all the stuff that's actually in the bill. We've been talking about it We've seen it come up a bunch So some tax credits return to the 2019 levels This means that taxpayers will likely receive a significantly smaller refund Compared to the previous tax year so obviously what has been happening during the covet time is when covet My interpretation when covet first happened and they kind of panicked and and they and they took action I think they kind of overextended but they you could see they first took action and By closing people's businesses and stuff like that So you can think that yeah, well that would make sense if the economy is going to be hit that hard That they send out stimulus payments and whatnot and then after that it seemed like they kind of extended the emergency To to be able to give out more stimulus payments and whatnot because now that's I think that's politically popular thing to do So it seems to me that they extended this amount of money just flowing out of the government Further than what was needed for the actual emergency for political reasons They didn't want to turn off the tap because it's going to be unpopular to do that But at some point they got to turn off the tap Because it's unsustainable to just do that. So now of course That some of the stuff is bouncing back to the prior emergency levels and People are going to be upset with that and whatnot. It's going to be changes to two things and That's so that's where we're at at this point in time So changes include amounts for the earned income tax credit the e itc The child tax credit the ctc and the child independent care credits So the earned income tax credit they adjusted it. That's one of the lower income Tax brackets that are based in part by income and they had all these other rules that you can use Different years of income to try to maximize the credit and whatnot the child tax credit They had a huge increase on it and they were really Really proud of that one and they sent out half of it in advance and they were touting that Through from the rooftops, but they couldn't that's so that's not happening again Then the child dependent care credit as well So they're going to go back to basically the pre-covid levels So for the e itc eligible taxpayers with no children who received roughly $1,500 in 2021 Will now get $560 for the 2022 tax year those who got $3,600 per dependent in 2021 for the ctc child tax credits Will if eligible get $2,000 per dependent for the 2022 tax year The child independent care credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021 finally Taxpayers that don't itemize and take the standard deduction Cannot deduct their charitable contributions this year They had a pretty small amount of charitable contributions that are usually on the itemized deductions that they pulled over To the first page of the form 1040 so they kind of played around with that one as well But it wasn't that big of a dollar like $300 so transactions a transaction year for 1099 k reporting there are no changes to what counts as income or how it is calculated Including income from the sale of personal assets taxpayers must report all their income on their tax return Unless it's excluded by law form 1099 k payments cards and third party network transactions is an irs information return Used to report certain payment transaction and helps to improve voluntary tax compliance. Now this is I think this is something like with the irs that we need to we need to kind of Look at a little bit more closely on how we want the irs to be working because notice they're mentioning here the voluntary Uh tax compliance system. That's basically what an income tax is and obviously if everybody's quite content And everybody's you know feels that the the government's doing what they're doing Correctly and whatnot Then people ideally would actually kind of want to file be proud To file their taxes and pay for the military and the protection that is provided and and everything but of course when when the Government it's felt that they're wasting money Or that you're being the money's being taken through compulsion or when the taxes get too high Then of course people get uh get annoyed At the taxes so it used to be in a voluntary kind of tax system That you basically reported your income tax on the 1040 without all the kind of oversight There was a there is you know still oversight But the system that used to be used was kind of like a system that's kind of like when you're driving on the freeway Where they would say we're going to have random audits We're going to audit randomly and if we audit you we're going to dig into your numbers And if you didn't pay your taxes, then we're going to hit you with a with a bill for not paying your taxes That means they're not going to catch everyone But the idea is there's audits out there Everybody knows just like there's policemen out there that if you get hit you could have a significant ticket That's going to be large enough for most people to self comply to fall into compliance. That's the general idea More and more they seems that they're moving from that system To the iris wants to be able to basically be able to create The tax return without voluntary tax compliance Because most people the iris can actually make the tax return probably on their end without voluntary compliance Because they're getting all the documentation By forcing the payer on the payer side of the transaction To provide them with the documentation that makes it easier. I get it that makes it So that more people are going to comply because obviously they don't really have a choice because obviously It's not really a compliance system. And so it means that more people are in compliance I think more people should be in compliance. That's good but It's also quite more intrusive Than the the other system the other way of doing it. So instead of having audits all the time Where someone's bait where they have random audits They just know exactly what you earned because they they're right up in your nose. They're right up in your business They know what was spent more and more so they don't need to do the audits the audits being done By the fact that they forced the the w2s the withholdings the 1099s and that stuff So so they they kind of act like it's still a voluntary system But it's not as much a voluntary system. And I think that's kind of something that we need to be like It's interesting to develop and we need to be more aware of it And you can see it clearly on those areas that they don't have a lock on such as the gig work economy Which now is being driven by a platform It's like a new silk road connecting business people that want to have a business And customers that want to pay for the business And then you so you don't have anywhere that the government can latch on to and say because it's the end user You can't have someone charge you can't force someone who's buying a pizza To to charge the pizza delivery company For for the 1099 right because they're not a business So so you can't charge someone who's getting their hair cut You know to make to give a 1099 to the person that cut their hair Whereas you can force somebody that's working for another business if I made a part For a large business then that business would 1099 me So the IRS is saying well, how can we get those guys? How can we get those people? Well, we can make the we can make the intermediary platforms the pay pals or whatnot or the credit card companies Or possibly the intermediary platforms that they're connecting to make them either an employee Or force them to issue 1099s And you can see again why they would want to do that it would increase compliance increase people reporting taxes In which people should report the taxes, but it's probably going to dampen the the amount of Of gdp growth the company is going to be more regulations less competition Because of the more regulations less ease for people to get into the marketplace because now they got to deal with a higher bureaucracy Which leads to more likely a monopoly at some point in time In certain industries and whatnot So I think these kind of issues are You know, they don't get talked about a lot, but I think they're kind of interesting to look at so taxpayers use this information to return With their their other tax records to determine their correct tax liability. So 2022 forms 1099 K should have been furnished to the payee by uh, january 31st 2023 So then you got the american rescue plan of 2021 Changed the reporting threshold for third party settlement organizations including payment apps and online settlement organizations The new threshold requires reporting of transactions in excess of 600 dollars per year 600 dollars. Are you kidding me? And so so obviously the other side of that is just the fact that the irs is tracking, you know, they're they're tracking You know, you have to report the information that's over a pretty low threshold And they're they're actually talking to the people, of course That you are that are your clients, right that you're doing business with which it seems quite intrusive Obviously the iris's argument would always be Well, it's just we're just looking at the for taxes. That's it. We're not doing anything else trust us We we wouldn't use it for any other means or anything like that But I you know, I mean my trust only goes so far And it's gone down a lot these so I I tend to say, you know, they're going a little too far in my opinion or way too far But again changed from the previous threshold of an excess of 20 000 dollars and an excess of 200 transactions per year So third party settlement organizations are required to report payments for goods and services On december 23rd 2022 the irs announced the calendar year 2022 will be treated as a transaction year A transition year for the reduced reporting threshold of 600 dollars a transition year Those that's always scary words, you know, it's a transition. Haven't we been transitioning for like the last 20 years? Don't worry. Don't worry. It's just a we're transitioning this time It's that's why because that's just an excuse of why things aren't quite rolling the way they should be It seems often common excuse. Don't worry. It's just a transit Anyways, even though the form 10 99 k reduced reporting requirements for third party settlement organizations to delay is delayed Some individuals may still receive a form 10 99 k who have not received one in the past Some individuals may receive a form 10 99 k for the sale of personal items or in situations where they received a 10 99 k in error Ie for transactions between friends and family or expense sharing now. This is where it gets kind of messy because if these third party platforms like the the credit card companies And the pay pals of the worlds and whatnot are responsible for the 10 99s If they get it wrong because you're just transferring money to a friend or family Then you're going to get it. You might get a 10 99 and that would mean that the irs gets a 10 99 And that you'd have to report it on your income tax return or the iris is gonna I'm gonna come back at you or whatever And that causes a problem because then if you want to get that fixed You have to go to the issuer of the 10 99 before you can file your tax return So that you can report it on your income tax without the thing on the 10 99 because the 10 99 was wrong So anyways Money received as a gift or to reimburse shared meals or rent should not report it on a 10 99 k Payments should indicate whether they are personal to family and friends or a business transaction for goods and services So if the information is incorrect on the form 10 99 k taxpayers should contact the payer immediately The payer's name appears in the upper left corner of the form The taxpayers should keep a copy of the correspondence with the payer with their records So if a form 10 99 k is received in error and a corrected form 10 99 k can't be obtained Follow the irs updated guidance at understanding form 10 99 k. So there's links to all that stuff here. There'll be a link to this in the description