 Income tax 2022-2023. Schedule C. What's new for 2022? Let's do some wealth preservation with some tax preparation. Support a counting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need then can be done on a YouTube page we also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it most of this information comes from the tax guide for small business for individuals who use schedule C publication 3 3 4 tax year 2022 you can find on the IRS website IRS.gov IRS.gov looking at the income tax formula we're focused online one that being income remember in the first half of the income tax formula is in essence an income statement but just an outline just a scaffolding meaning other forms and schedules will be feeding into these line items we here focused on the income line and the schedule C the form used for sole proprietors and small businesses which is in essence another income statement having business income minus business expenses otherwise known as business deductions that will get down to in essence net income from the business which will flow into line one of our income tax formula that being income as we can see here on the first page of the form 1040 where the schedule C net income flows ultimately into line 8 other income from schedule one this is the net income from schedule C here's an example of the schedule C profit or loss from business where we have income minus the expenses the net income flow into schedule one then to page one of the schedule C okay so what's new for 2022 the following are some of the tax changes for 2022 you got the maximum net earnings the maximum net self-employment earnings subject to the social security part of self-employment tax is 147,000 for 2022 there is no maximum limit on earnings subject for the Medicare part so in other words when we're thinking about our self-employed business we have to deal with the federal income taxes but we also have to deal with the equivalent of the payroll taxes if we were a double you to employee that being social security and Medicare the self-employment taxes so when we look at the social security part in particular there's actually a cap in terms of when how far you're going to be taxed in other words if you clear the cap of 147,000 you will no longer be paying social security over and above that threshold why well part of it has to do with the amount of benefits you're going to be getting in retirement for paying into social security in other words social security used to be more of a safety net program so we kind of thought of so you might think of it as we're putting money in so that people who happen to live past their their age to be able to support themselves because they live longer than they expected for example it would be their social security could have a safety net to support that situation for example but more and more social security is thought of as kind of like a federal retirement program where we pay into it and we expect to get benefits out of it in retirement years I'm retired retired and in that kind of system the more you pay in the greater your benefits you would expect to be receiving and if your income goes above this threshold for example you're not actually getting any more benefit from the amount that you're going to be receiving in retirement that's one rationale as to why there might be a cap on it whereas when we think about the Medicare part this is still kind of thought more as a safety net kind of program there is no cap and you can also see that in the tax rates which we'll get into when we get into self-employment taxes the social security is quite a high tax rate that we are using the Medicare is a smaller tax rate so any kids will talk more about that later we but obviously that cap is something that's often contingent or something that's contentious people often debate where that cap should should be but typically it will be going up each year to be in compliance at least with inflation okay then we got the standard mileage rate so for 2022 the standard mileage rate for the cost of operating your car van pickup or a panel truck for each mile of business use from January 1st 2022 to June 30th 2022 is 58.5 cents per mile notice whenever we use this mileage rate you might think it's the same for any time it might be put in place so such as for medical use on a schedule a and for charity and so on but they're not always the same right we're talking about the standard mileage rate as it relates to the schedule see where you have the option possibly of taking the actual deductions related to your car use for business or the mileage rate that this one they're pretty good about increasing and updating each year so this is the updated rate and so that's what we would expect to be happening each year the business and why would it go up each year because of inflation so we would expect changes to happen in the code even if everything was the same from year to year and it might be in the code just by the code saying they're gonna mark up these dollar amounts in accordance with inflation because the the purchasing power of the dollar will go down the Federal Reserve actually targets the purchasing power of the dollar to decrease meaning there should be inflation of around 2% so you would expect then that all the caps and all these payout numbers have to take that into consideration from year to year otherwise the tax code will get will look silly and sometimes that happens the tax some numbers on the tax code aren't marked up for inflation and you look at the number and you're like why that's a really low number why is that even there well it was significant when they put it in the law they just didn't increase it with regards to inflation right and so that happens but the big numbers we would expect them to update them with inflation so that's here the business standard mileage rate from July 1st 2022 to December 31st 2022 is 62.5 cents per mile so we've got these two rates for the two halves of the year again which is kind of messy notoriously messy but it is what it is software will help us we'll talk about the mileage rates later for more information you could see car and truck expenses in chapter 8 of the publication if you want to jump there new form 7205 energy efficient commercial building deduction this new form and its separate instructions are used to claim the section 179 D deduction for qualifying energy efficient commercial building expenses so if that's applicable you can take a look at the form 7205 for more information on it qualified paid sick leave and qualified paid family leave payroll tax credit the amount of any payroll tax credit taken by an employer for qualified paid sick leave and qualified paid family leave under the family's first coronavirus response act and the American Rescue Plan Act C form 941 and 944 so those are the payroll related items remember of course during the whole coronavirus situation they put some laws in place many of which were attempting to try to keep people in working keep people on the payrolls even though they were shutting down kind of businesses so you've got those funny changes that happen to payroll you can look more on the forms 941 and 944 the payroll forms if you want to dive into that more detail you must include the full amount both the refundable and non refundable portions of the credit for qualified sick and family leave wages and gross income for the tax year that includes the last day of any calendar quarter that respect with respect to which a credit is allowed note a credit is available only if the leave was taken after March 31st 2020 and before October 1st 2021 and only after the qualified leave wages were paid which might under certain circumstances not occur until a quarter after September 30th 2021 including quarters during 2022 business meal expense for a limited time business meals are 100% deductible under certain conditions see meals and lodging later for more information this is of course is one of the expenses that's always kind of confusing because it seems to mix up the concepts of business and personal so when we think about deducting meals then we have to we have to make sure that we're properly deducting meals it used to be that meals and entertainment was like 50% deductible and then we have these differences between meals and and travel kind of expenses if you're if you're traveling for overnight then we have could have some different differences in the recording so that's one of the ones that will dive into a little bit in more detail when we get into the business expense categories